42 BULLETIN 1479, U. 8. DEPARTMENT OF AGRICULTURE 
tutes, together with opinions regarding probable purchases of grain 
futures, are the factors of importance. 
Of these factors the most difficult to estimate even roughly are 
those relating to probable sales or purchases of grain futures. The 
supply of a particular grain future which may be offered on the market | 
at any moment, without any possible way of predicting it, is practi- 
cally unlimited. There is no direct relationship whatever, other than 
for a short period during the current delivery month, between the 
supply of actual grain available for the market and the supply of grain 
futures which may be sold. Likewise, there is no direct relationship 
between the demand for actual grain and the volume of buying which 
may at any time enter thefuturesmarket. In thisrespect the buying 
and selling of futures differs in degree at least from the purchase and 
sale of actual grain. In the latter case the total supply is limited by 
the actual stock times the rapidity of turnover; in grain futures the 
“stock”? may be any amount and the rapidity of turnover very high. 
It is because of this lack of any natural limit to futures trading 
growing out of the needs of commerce in the merchandizing of any 
given crop that it is subject so often to abuse. Information already 
presented shows that the futures price moves with the net purchases 
and sales of a few leading speculators. The reason why the price so 
moves is because large amounts are bought or sold at a single time 
followed by additional large units. There is apparently no limit to 
the volume of buying or to the volume of selling and as a result 
market resistance or support weakens. 
The remedy for this condition has already been suggested in an 
earlier report of the Grain Futures Administration on ‘‘ Fluctuations in 
wheat futures.’’? Some limitation on the size of lines long or short and 
upon the extent to which an individual speculator may buy or sell 
within the limits of a trading day is necessary. In addition it seems 
advisable to place some limitation upon the extent to which prices 
of grain futures may fluctuate within a single day. These conclusions 
are based on the assumption (1) that the grain trade and the farmers 
desire a greater degree of price stability than now exists and (2) that 
supply and demand factors growing out of actual grain conditions 
should have a relatively greater, and futures trading of itself a rela- 
tively lesser importance in determining grain prices. 
The operations on the part of large speculators were on a larger 
scale in the 1926 May wheat future than in the 1925 future. Had the 
public participated in the 1926 May to the same reckless degree as in 
the 1925 May, there is every reason to believe price fluctuations would 
have been equally as wide or possibly wider in extent. 
The results of this study confirm and strengthen the conclusions 
presented in the previous report, and the recommendations based on 
the earlier investigation are even more applicable to this bulletin in 
the light of the facts here set forth. These recommendations are as 
follows: 
A limitation of some kind on the size of lines, long or short, and especially on the 
extent of buying or selling within a day by speculative traders seems inevitable if 
there is to be eliminated from the market those hazards which are so unmistak- 
ably reflected as existing whenever excessively large lines are held by individuals. 
It is belived that an effective limitation upon the trading operations of large 
speculators would prevent at the outset the accumulation of a ‘‘line”’ of excessive 
proportions either long or short. In addition, it should tend to insure a more grad- 
ual accumulation or liquidation and thus make for greater stability of prices and 
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q 
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