BOARD OF TRADE 



7,s<i 



BOARD OF TRADE 



thousands of others have like crops and not one 

 of all those farmers has the means of knowing . 

 whether the combined crops of all will meet 

 or exceed the world's demands. And upon the 

 demand the price per bushel is based. More- 

 over, the fanner acting independently would 

 have trouble to learn where there was need of 

 his wheat or corn and therefore would find 

 difficulty in securing a market. 



We know that he may take his grain to the 

 nearest village any day and sell it. His daily 

 paper tells him the price that prevailed the 

 day before. If he is a careful reader he knows 

 the possibilities as to higher or lower prices in 

 the future, and he may determine to hold his 

 crop until he can get more money for it. 



Who fixes the price per bushel, and how is 

 the price determined? Is it controlled by a 

 group of men, and is the farmer at their mercy? 

 Many people believe that powerful men with 

 immense capital control the situation, and that 

 they can raise or lower prices at will in other 

 words, that they gamble on the upward or 

 downward turn of the market and that the 

 weight of their dollars turns the scale in the 

 direction of higher or lower prices. This is 

 almost entirely a mistaken idea. If such a 

 condition ever should exist there would be 

 instant demand for legislation against it. 



Prices are fixed by men, it is true, but they 

 are forced in the beginning to recognize what 

 is a just and reasonable price for all grains. 

 It is a well-established principle that wheat 

 should average in price, year after year, at 

 least one dollar per bushel. A group of men 

 in Chicago and another in Liverpool are sec- 

 ondarily responsible for any changes from an 

 average price. The dominant influences which 

 control price are the supply of a product and 

 the demand for it. The two groups of responsi- 

 ble men who dictate prices are guided primarily 

 by these two conditions. They comprise or- 

 ganizations known as boards of trade. 



The reason for the location of the most 

 important boards of trade in Chicago and 

 Liverpool is that Liverpool is the world's great- 

 est grain market and Chicago is the great mar- 

 ket in the western hemisphere, close to the vast 

 grain-producing sections, and the largest grain- 

 shipping center in the western world. There- 

 fore Liverpool and Chicago men are naturally 

 able to determine more accurately than other 

 people what the grain supply for any year is 

 to be. Their agents, located all over the grain- 

 producing areas, make daily reports of crop 

 conditions and prospects. The world's demand 



for cereals is quite accurately known from year 

 to year, therefore it is not difficult to determine 

 whether there will be enough grain to meet the 

 demand. Prospects of a shortage is sure to 

 raise the price; evidence of overproduction 

 will naturally make every bushel less valuable. 



The board of trade in Chicago reflects every 

 day the world's crop conditions. Wheat may 

 sell at $1.30 per bushel as a result of dryness 

 over a vast grain area, thus making an average 

 crop doubtful. One night over the wires may 

 flash a report of heavy rains extending the 

 length and breadth of that area. The next 

 morning operators on the board of trade will 

 hammer the price downward, for the wheat 

 crop prospects have changed for the better, and 

 the cereal will clearly bring less money per 

 bushel. Thus do prices fluctuate. Boards of 

 trade in other cities receive telegraphic quota- 

 tions from Chicago and Liverpool and almost 

 instantaneously prices are equalized throughout 

 the world. 



In addition to the above necessary service 

 performed by boards of trade they have estab- 

 lished uniform standards of quality, or grades, 

 of grains. The term number one hard applied 

 to wheat means the same throughout the 

 wheat-growing world. 



The above is a brief sketch of the beneficial 

 aspects of the board of trade those activities 

 which in the nature of things some agency 

 must control. There is another and a distinctly 

 different and unfavorable view held by many 

 people, and at times it would appear there is 

 evidence to support it. That there is gambling 

 in the fluctuating prices of cereals is admitted ; 

 the gambling instinct is ever present in some 

 men, and they will place bets regardless of law 

 or moral considerations upon whatever offers 

 the possibility of gain. The board of trade 

 seems unable to suppress the speculative ten- 

 dencies of men determined to venture money 

 upon the rise or fall of prices. Beneath their 

 activity, however, is the inevitable law of 

 production and demand, and seldom do they 

 seriously change stable conditions by their on- 

 slaughts upon the markets. 



Occasionally, when very unusual conditions 

 have made such operations possible, the specu- 

 lative instinct has led men to attempt to "cor- 

 ner" the supply of a commodity. A "corner" 

 is an artificial scarcity of a grain, created by a 

 combination of men with large capital for the 

 purpose of holding the article affected off the 

 market by buying practically all the visible 

 supply. The object is to extort abnormally 



