846 READINGS IN RURAL ECONOMICS 



poorer people bought finished flour or bread. In the larger towns 

 the trade in flour and bread was rather more considerable, but 

 even in towns like Paris and London much wheat was bought 

 by townspeople for their needs and ground at their expense in 

 mills near the city. The milling business was non-speculative, 

 but it was necessarily conducted on a small scale with moderate 

 equipment. Dependence upon local slaughter-houses was an 

 equally prominent feature in the life of the past. Absence of 

 refrigeration and of means of rapid transportation rendered the 

 preparation of all meat products a distinctly local affair. Further- 

 more, there could be no question of risk from change in values 

 of the raw product in the interval between the purchase of the 

 creature and the disposition of the prepared meat. There was 

 no appreciable interval. The butchers' trade was thus non- 

 speculative, though the consumers did not buy the live creatures. 



In the course of the last half century, milling and packing 

 have become capitalistic enterprises in no small portion of the 

 western world. Flour consumed throughout the United States 

 and in parts of Europe is milled in Minneapolis. Beef products 

 consumed in the United States and in Europe are prepared in 

 St. Louis and in Chicago. The raw material must be purchased 

 months before the finished product can be sold. A change in 

 market conditions might destroy entirely the mercantile profits 

 of a highly efficient plant. Such enterprises can be conducted 

 only if it is possible to reduce them to a non-speculative basis 

 comparable to the conditions of the old craft organization of days 

 gone by. The future market affords a means of avoiding the 

 speculation on the raw product. 



The essential feature of the hedge is the combination of sale 

 and purchase at both moments of contact with the market, both 

 at the beginning of the process of manufacture and at the time 

 of sale. Raw materials must be purchased for production in the 

 spot market. With this transaction is coupled a term contract 

 calling for the delivery of the same quantity of goods during the 

 month in which the finished product will be ready for sale. The 

 sale of the future is at the same price as the spot purchase. 

 The miller is thus on both sides of the market. When the time 



