MARKET METHODS AND PROBLEMS 503 



of grain must be in large lots, the future contract comes in to protect the 

 handler. The New York merchant, therefore, sells 100,000 No. 2 spring, 

 September delivery, at Chicago at the date of his Duluth purchase, in 

 August. When the wheat reaches Buffalo the price has advanced and 

 millers there want some No. i hard wheat. He sells them 2 5,000 bushels 

 and buys 25,000 bushels of No. 2 spring wheat at Chicago, September 

 delivery, to make good the original quantity purchased. By this time he 

 has also sold at New York 100,000 bushels, September delivery, to an 

 exporter and bought 100,000 bushels more at Chicago, relying on the 

 75,000 bushels on the way and his ability to get 25,000 bushels more before 

 it is demanded, to keep his engagement. When the 75,000 bushels of No. i 

 hard spring wheat reaches New York the price has declined fractionally, 

 and the owner is enabled, in consequence, to purchase 25,000 at a slightly 

 better price, relatively, than he had paid in Duluth, selling 25,000 bushels 

 coincidently at Chicago for September delivery. He lost on his Duluth 

 purchase and on the 25,000 and 100,000 bushel purchase at Chicago, and 

 on the 25,000 bushel purchase at New York. But he made rather more than 

 coiresponding gains through his sale, spot delivery, of 25,000 bushels at 

 Buffalo, including profits on his sales of 225,000 bushels for September 

 Delivery at Chicago and New York, so that he gains on sales of 250,000 

 bushels and loses on .the purchases of 250,000. The transaction as a whole 

 is not very profitable, but millers at home and abroad get wheat at the 

 lowest market prices at dates of purchases, the grain is moved from Minne- 

 sota elevators to Buffalo and New York and the Glasgow mill, and the 

 merchant whose sagacity, energy, and foresight led him to aid in the under- 

 taking, even when price conditions were unfavorable, is able to protect 

 himself from excessive loss without depressing the price to the original 

 holder, who represents the grower, and without having as incentive (not 

 to mention the ability) to unduly advance the price to the consumer, as 

 represented by the miller. 



The same method is adopted by the elevator men, the exporters, 

 and the manufacturers. Millers own large stores of wheat in country 

 and terminal elevators, which are insured by the same process. As 

 soon as the miller buys in the country, or elsewhere, for grinding pur- 

 poses, he sells an equivalent amount by telegraph on some exchange. 

 Then when he disposes of his flour, he covers at the same moment his 

 hedging sales by corresponding purchases. Since flour in the main 

 fluctuates with the value of wheat, this affords nearly complete pro- 

 tection. The manufacturer of cotton, on the other hand, usually 

 protects himself by purchases. Spinners do not hold such large 

 stocks of their raw material as do the large millers, and often sell their 

 product for delivery at home or abroad at some future time, while 



