352 THE GRAIN TRADE 



Speculation and Price Fluctuations. The fact is that this spec- 

 ulation is a factor tending to put on brakes when the market starts 

 to bulge or break. It stabilizes. It lessens the fluctuations 

 makes them many and frequent and small, rather than few and 

 large. Prices of wheat, for instance, fluctuated much more on 

 the American market during the 60 years 1790-1850 (when there 

 were no organized grain exchanges) than they did during the 50 

 years of organized grain exchanges (1865-1915). And, as stated 

 in the chapter on speculation, grains subject to future trading 

 show smaller price fluctuations than grains not subject to future 

 trading (Figs. 71 and 72). 



Cost of Future Trading. Future trading has been defined as 

 of two interrelated and interdependent kinds, hedging and specu- 

 lation. All persons familiar with the grain trade admit the benefits 

 of hedging, but many critics say that speculation is of such large 

 volume as to overshadow completely the hedging transactions, and 

 that this large volume of speculative trading imposes a toll on the 

 public far outweighing the benefits of hedging. It is very probable 

 that half the future trading in grain in the United States is done 

 on the Chicago Board of Trade, this trading representing every 

 State in the Union and a few foreign countries. It is the opinion 

 of the writer that the volume of future trading in any one normal 

 year in Chicago amounts to ten billion bushels of wheat and ten 

 billion bushels of corn and oats together, a grand total of twenty 

 billion bushels. The normal crop in these grains is five billion 

 bushels, that is each bushel of cash grain is bought and sold four 

 times in the pit. What is the "toll" on this amount of future 

 trading? Future trading may be classified as of three kinds, so 

 far as costs are concerned, namely, (1) members trading for them- 

 selves; no commission is charged on this; (2) members trading for 

 other members; the rate on this is the "half rate," namely, $6.25 

 for 5,000 bushels bought or sold or both bought and sold (the 

 so-called "round turn"); (3) members trading for non-members, 

 on which the rate is $12.50 for 5,000 bushels round turn. Since 

 about one-fourth of the future trading is for non-members and 

 one-fourth for other members, it follows that the total commissions 

 collected on a year's future trading in wheat, corn and oats in 

 Chicago amount to approximately one-third of a cent a bushel 

 "toll" on the year's crop, not a very heavy price for the insurance 

 afforded by the hedging, which is an integral part of future trading. 



Bucket-Shop Fight. The account of the evolution of the organ- 

 ized grain exchange is not complete until the story of the bucket- 



