WHEAT IN WESTERN CANADA 133 



Occasionally it happens that the hanks have not at their 

 disposal the whole of the huge sum necessary to finance the 

 crop movement from the farms to the head of the lakes. It 

 is then necessary for the hanks to seek outside help hy bor- 

 rowing credit from the Government or from some other 

 source. If, for any reason, the banks did not make credit 

 available in sufficient quantity to those who buy wheat 

 from the farmers, the purchasing power of the buyers 

 would be naturally restricted, the farmers would tend to 

 sacrifice their grain for unduly low prices, and the whole 

 machinery of the grain trade would be seriously affected. 

 It is thus seen that the normal functioning of the banks 

 is of the very highest importance both to the grain growers 

 and the grain buyers. 



When an elevator company buys grain in the country, 

 it pays cash to the farmer, using money borrowed from 

 the bank; and it then immediately re-sells the wheat at a 

 slightly higher price on the Winnipeg Grain Exchange as 

 a future, i. e., for delivery in some future month at Fort 

 William or Port Arthur. This operation is known as 

 hedging. The immediate re-selling of the grain as a future 

 protects the elevator company against loss by a possible 

 fall in the market during the weeks or months that the 

 grain is en route to the head of the lakes, enables the 

 company to make a definite small profit on each transac- 

 tion, and, at the same time, protects the bank from which 

 credit has been borrowed. The selling of cash grain as 

 futures serves as a means of eliminating speculation from 

 the business of the elevator companies; and one of the 

 most important and beneficial functions of the Grain 

 Exchange is that of providing the machinery by which 

 such selling is accomplished. Were this machinery not 

 always available, the banks could not afford to lend their 

 money for moving the grain as cheaply as they do, and 



