12 



Code Would Clean 

 Up Board oF Trade 



Administrator Peek Warns Grain Exchanges To Measure 

 < : : Up or Face Stringent Regulation 



GEO. V. ¥eEK 



THE wild speculation of mid- 

 July when the grain market 

 crashed on the Chicago Board 

 of Trade would be done away with as 

 a result of the new grain code ordered 

 .( drawn up by Geo. 



N. Peek, chief of 

 the Agricultural 

 Adjustment Ad- 

 ministration. 



Under the terms 

 of the code ori- 

 ginally submitted 

 margins required 

 for open contracts 

 up to 250,000 

 bushels shall be 

 10 per cent of the 

 market price. On 

 open contracts up to 2,000,000 bushels 

 the margin shall be 10 per cent on the 

 first 250,000 bushels and 15 per cent 

 on the remainder. On all trades over 

 2,000,000 bushels the rate shall be 20 

 per cent. 



Exchange authorities are given wide 

 authority to examine any and all 

 tickets, records, contracts, accounts 

 and papers of any Exchange member. 



Mr. Peek objected to the code sub- 

 mitted suggesting that the exchanges 

 should exclude from membership all 

 persons actively engaged in trading 

 and speculation. 



Some exchanges, he said, now have 

 conduct committees from which active 

 traders and speculators are excluded, 

 but the Chicago Board of Trade is not 

 one of them. 



Mr. Peek outlined several sugges- 

 tions for inclusion in the grain ex- 

 change code, as follows: — 



1. That they do a more thorough job 

 of cleaning up their own organization 

 and practices. 



2. That business conduct committees 

 exclude speculators and traders and 

 that they be selected as to warrant 

 public confidence. 



3. That trades be policed by special- 

 ists hired for that purpose. 



4. That exchanges co-operate fully 

 with the grain futures administration 

 at Washington and with local repre- 

 sentatives of the administration in the 

 cities where located. • 



Before the grain code was con- 

 sidered Peek warned the grain men 



that they faced the most drastic gov- 

 ernment control if the code proposed 

 was not satisfactory. 



He said: "We have one responsibil- 

 ity under the law. That is to get the 

 farmers' prices up to parity and to 

 keep them from falling below that 

 point. You gentlemen operating the 

 market also for the farmers' grain 

 also have a responsibility. Under the 

 law we are going to exercise every 

 power that we have, if it is necessary, 

 to accomplish the purpose of the law. 



"Unless we can get these farm 

 prices up — I don't mean after the 

 farmer has sold his grain, but before 

 he has sold his grain — I anticipate 

 that you will face legislation next 

 winter which may make what we are 

 talking about now fade into insignifi- 

 cance compared with the restrictive 

 provisions that will be placed upon 

 you. 



"I say that with all the candor in 

 the world, because I am interested 

 primarily in preserving the social 

 order under which we have all grown 

 up and prospered to a greater or less 

 degree. 



"With the number of strikes all over 

 the country — the coal strike in 

 Pennsylvania, the milk strike in New 

 York, the lumber strike throughout 

 the entire lumber regions, and others 

 — if you don't keep the farmer con- 

 servative, then he is going with the 

 other crowd. He isn't going to stand 

 still and be dispossessed of his home 

 and his property through no fault of 

 his own. 



"It is in the interest of the nation, 

 I think, that everything that can be 

 done shall be done to keep him con- 

 servative. 



"That has got to be changed, and if 

 this code doesn't go far enough to cor- 

 rect the abuses on the exchanges, then 

 I urge you with all the sincerity I 

 have in my heart to undertake to do 

 whatever is necessary to clean your 

 own house and justify your existence 

 as the market for the farmers' grain." 



In the meantime the Grain Futures 

 Administration is making a complete 

 investigation of the grain markets and 

 will report to the Secretary of Agri- 

 culture with recommendations for fur- 

 ther regulation if necessary. 



I. A. A. RECORD— September, 1933 



The grain code was ordered to pre- 

 vent recurrences of the 30 cent drop 

 in wheat prices in two days caused by 

 one speculator, "Doc"' Crawford, ob- 

 taining 13,000,000 bushels of corn, 

 alone on margin contracts besides sev- 

 eral million bushels of other grain. 



When prices started on the tobog- 

 gan and Crawford was unable to put 

 up any margin he had to be sold out. 



This selling out process meant in 

 effect that his brokers, 17 in num- 

 ber, would be compelled to dump this 

 huge quantity of grain and thereby 

 cause a severe break in grain prices. 



It is known that Crawford traded in 

 a large volume of grain privileges or 

 indemnities which is purely gambling. 

 At one time the government barred 

 this practice and the new grain code 

 also will stop this kind of speculation. 



Since the sharp break in the market 

 Board of Trade spokesmen have been 

 strangely silent. Only a few months 

 ago they were loudly berating the 

 Farm Board, the Department of Ag- 

 riculture, the Grain Futures Act and 

 farmer-owned and farmer-controlled 

 co-operative marketing institutions de- 

 manding absolute freedom against any 

 kind of regulation. As a result the 

 grain exchanges were given a free 

 hand with the result noted. 



An unregulated speculative market 

 is not only a nuisance but also a detri- 

 ment to the grain grower. He doesn't 

 know whether the crop will bring 

 enough to pay the threshing bill and 

 taxes or not. With such an unreliable 

 market it is impossible for him to 

 plan ahead. The speculative system is 

 directly opposed to planned production 

 and price stabili^fition provided for in 

 the Agricultural Adjustment Act. '■•■? 



On July 31 the grain market 

 dropped to the limit set by the Ex- 

 changes at the direction of the Sec- 

 retary of Agriculture. On August 1 

 the market went to the other extreme 

 with but few trades in between. 



The supposition is that a few big 

 speculators were pushing it up or 

 down at will. Incidentally, during the 

 moratorium on speculative trading a 

 few months ago cash prices steadily 

 advanced. Many believe that if a six 

 months moratorium were placed on 

 future trading and speculation, the 

 farmer would be benefited. In such 

 an event the public would be forced 

 to turn to horse racing, or the stock 

 market to satisfy its gambling in- 

 stincts, and the grain brokers would 

 miss their lucrative commissions, but 

 farmers would be in a better position 

 to work out an orderly production and 

 marketing program which in the end 

 is the only way to re-establish and 

 maintain reasonable prices for farm 

 products. - . 



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