49 6 AGRICULTURAL ECONOMICS 



4. It serves to level prices between different markets. Reference is 

 had here to the practice of "arbitraging" between markets. Arbi- 

 traging may be denned as the making of two transactions, one a 

 purchase and the other a sale, in different markets or in the same 

 market between two different subjects of trade, at about the same 

 time, with a view to shaving a profit because the price in the one 

 market, or the one subject of trade, is lower than in the other. If 

 the arbitrageur knows that wheat is selling lower in Minneapolis than 

 Chicago by an amount greater than he thinks ought to be the case, 

 in view of transportation and other charges, he can use the low market 

 for making an actual purchase of wheat, and at the same time use the 

 high market to sell short an equal amount for future delivery during 

 some convenient month. He may then transport the wheat from the 

 low market to the high market and deliver the same in fulfilment of 

 his short sale. Or it may happen that at a given time the quotations 

 for wheat on the Minneapolis Chamber of Commerce and the Chicago 

 Board of Trade may be "out of line," i.e., the difference between the 

 two prices may be an unnatural one in view of the cost of transporta- 

 tion and handling which must be taken into account in moving grain 

 from one city to the other. In that case the arbitrageur, feeling sure 

 that this unnatural difference must soon right itself, may buy a future 

 in the low market, selling the same amount short for future delivery 

 in the high market. Then, if the two prices come together, he can close 

 out both of these transactions, and net as a profit the amount repre- 

 sented by the extent that the two prices have come together minus, 

 of course, all expenses. Through their constant watchfulness all 

 leading markets are kept "in line" with one another. Grain, like 

 water, will seek its level. It will move from the center where it is 

 plentiful to where it is not plentiful. Instead of chaos we are given 

 a harmonious relationship between different markets, between grades, 

 between the several monthly delivery periods, and even between 

 different kinds of grain. 



157. RULES FOR THE GRADING OF GRAIN 1 



RULE I WINTER WHEAT 



No. i WHITE WINTER WHEAT shall include all varieties of pure soft 

 white winter wheat, sound, plump, dry, sweet and clean, and weigh not 

 less than 58 pounds to the measured bushel. 



1 Prescribed by the State Public Utilities Commission of Illinois. In force 

 on and after July i, 1914. 



