MEDIEVAL AND MODERN PRODUCE MARKETS 845 



the arbitrageur closes out his transactions at these prices. By 

 closing out his purchase in Minneapolis by a sale at ^1.04, he 

 makes 4 cents, and by covering his short sales at Chicago by a 

 purchase at tijoy}^ he loses 3|- cents, thus clearing a gross profit 

 of \ cent. 



This mode of trading is also applied to other types of price 

 differences, and the practice is doubtless significant, but it would 

 seem that its importance to the market is somewhat different 

 from that of the other forms of arbitrage. In many respects this 

 type of transaction seems to be particularly adapted to maintain 

 relations between different prirnary markets that are receiving 

 supplies from the producing regions. Actual shipments from 

 market to market are in such circumstances a less convenient 

 means of keeping markets '" in line " than changes in the flow 

 of the crop from those districts which can reach both of the 

 markets concerned. 



The hedge has been closely associated with a number of sig- 

 nificant industrial changes. The transaction is widely used to-day 

 in connection with flour-milling, meat-packing, cotton-spinning, 

 and to some extent in the coffee trade. All these industries 

 have been transformed or have grown up since the rise of the 

 modern methods of marketing. The development of large-scale 

 production in milling and packing would scarcely have been 

 possible were it not for the hedges, and cotton-spinning could 

 not be conducted upon such a narrow margin of profit if the 

 risk of changes in value in the raw product were not eliminated. 

 The nature of the change will perhaps be most readily appre- 

 ciated with reference to flour-milling, as there has been a less 

 general alteration of the place of the occupation in social life. 

 The risk of loss to the miller through fluctuations in the price 

 of grain was eliminated in the old days by transferring the risk 

 to the consumer. The well-to-do and middle-class people were 

 largely accustomed to buy grain and have it ground for their 

 own use according to needs. The sale of raw wheat thus played 

 a more prominent part in retail marketing a century and a half 

 ago than it does to-day. The miller charged a small fee or took 

 a portion of the meal as his toll. In the smaller towns only the 



