BENEFITS OF SPECULATION 317 



market he could afford to handle grain only by allowing a wide mar- 

 gin for profit. 



(5) At certain times of the year the farmer has food supplies in 

 excess of the needs of his local community, while in districts where 

 farming is replaced by other industries as manufacturing, etc., not 

 enough food is produced to meet the demand. The problem of get- 

 ting this surplus to the places where needed involves time and risk. 



(6) Through the central markets grain is bought and sold in 

 large quantities. Without our present system of marketing it would 

 be necessary to secure this grain from a considerable number of in- 

 dividual farmers or producers. In either case the element of time in 

 getting such quantities of grain together must be considered. 



The Benefits of Speculation. This has reference especially to the 

 practice of dealing in futures. 



(1) It creates a continuous and open market and gives a daily cash 

 sale for grain. As long as there are men who in their study of supply 

 and demand think they can make a profit in buying grain and dis- 

 posing of it later we have a steady sale for the grain. The value of 

 this continuous market can hardly be overestimated. 



(2) More stable prices are created. Under present conditions the 

 entire surplus crops are not immediately upon harvest thrown upon 

 the market, thereby depressing prices, nor just preceding harvest are 

 prices raised to exorbitant level on account of vanishing supply. 



(3) Discounts changes in supply and demand. If the price of 

 grain for the future market is high it can indicate but one thing, 

 under normal conditions, that the supply will be small. It therefore 

 serves to adjust the demand to the probable supply. Wastefulness 

 and extravagance in the face of such a shortage is averted, and one is 

 not led to horde grain in the face of a large supply when it would have 

 to be sold on a declining market. The future prices are an indication 

 of existing supply. 



(4) Grain can be handled with a minimum of expense to the 

 producer. The margin of profit in handling grain is lower than is 

 exacted in the handling of any other business. Under the conditions 

 of the past it was necessary to allow a margin of about ten cents on 

 the bushel in handling grain, but at present it is handled on an 

 average probably not to exceed one per cent of present values. 



