MARKET METHODS AND PROBLEMS 493 



With this grain paper as collateral security the banker will grant him 

 a loan to the extent of about 90 per cent of the value of the grain or 

 $90,000 according to our assumption. Our grain buyer may imme- 

 diately purchase another 90,000 bushels and, by the same process, 

 borrow another $81,000 for further purchases. This operation might 

 be continued until his original capital has been entirely or almost 

 entirely absorbed in margins. This grain buyer has been enabled, 

 through the ease with which grain can be rendered mobile under 

 present exchange methods, to do a business seven or eight times as 

 large as would be possible under other conditions. The farmer has 

 been benefited in that he may dispose of his entire crop within a short 

 time, and on a cash basis, irrespective of the immediate demands of 

 the consuming world. 



One reason why the bankers lend so readily on grain paper is 

 because they know that grain always has a ready market on our pro- 

 duce exchanges, thus affording them ample opportunity, if necessary, 

 to sell the grain held as collateral before the margin of 10 per cent 

 on the loan is exhausted. During every hour of every business day, 

 there is always present on our produce exchanges a group of brokers 

 and speculators always ready to buy and sell, and so numerous as to 

 furnish a continuous market where, in the course of a few minutes 

 and with the sacrifice of only a small amount in the price, hundreds 

 of thousands of bushels of grain may be either bought or sold. The 

 existence of such a continuous market is greatly facilitated by the 

 presence of a group of spectators who are willing to buy any supply 

 that may be offered, because in their judgment a profit will be derived 

 by selling it at a future time. The advantage of such continuous buy- 

 ing to the dealer or to the banker has just been explained; but a 

 continuous market throughout the year and at reasonably steady 

 prices is essential to the farmer also. As stated, farmers realize upon 

 the larger part of their crops shortly after harvest, and were it not 

 for the large group of buyers who are always willing to take the grain 

 with a view to storing it and selling it for future delivery, it would 

 necessarily follow that prices would fall extremely low at harvest. 

 Mr. Merrill, president of the Chicago Board of Trade, suggests that 

 "the testimony of all large grain merchants is that formerly the price 

 of handling grain averaged six, eight, and ten cents a bushel, instead 

 of an average of a two-cent margin at the present time." Or it may 

 happen, as Mr. Merrill explains, that "the farmer may have his crop 

 still in the ground, or he may have it upon his farm awaiting a time 



