The publication of Commodity Exchanges and Futures Trading with its comprehensive descriptions of the development, functions, and operating methods of Commodity Exchanges is most timely.
Since the organization of the first Commodity Exchange shortly after the Civil War, these Exchanges have been the scapegoats of producers, consumers, and politicians. They have been held responsible both for inflation and for deflation. At the peak of every inflationary spiral, the Exchanges and speculative operations thereon are blamed for high prices. At the bottom of every deflationary period, they are charged with the responsibility for low prices.
Congressional Committees have from time to time held extensive investigations and public hearings with respect to these Exchanges. Recent activities in this field (in 1947 and 1948) have centered mainly around the grain Exchanges because of prevailing high prices of wheat, corn, and other cereals on both domestic and foreign markets. Yet, when one examines the facts objectively, it appears that only in the United States today do free markets, responsive to economic forces, prevail in grains and most other staple commodities.
Since early in World War II there has been no free market for wheat in Canada where the Dominion Government has been the exclusive buyer at fixed prices of all wheat for export, selling it to the British Government on long term contracts at prices determined by the two governments. Likewise, the Argentine Government has become the exclusive buyer and seller of all wheat and many other products for export.
In 1947, as a consequence, the Argentine Government was selling wheat at the equivalent of $4 to $5 per bushel and Canada, on a long-term five year contract, was exporting wheat to England at $1.80 per bushel, while the United States, the only free market, was shipping wheat to Europe at prices ranging from $2.40 to $3.20 per bushel. In other words, the Argentine farmer is forced to sell at low, arbitrary prices wheat which his government sells abroad at exorbitant profits, possible only in a starving world.
Meanwhile in Canada, where the government, with the wheat exchanges suspended, sold its farmers’ wheat crops short over a five year period at fixed prices, the farmer receives prices 50 to 60% below those prevailing on the free markets in the United States. In fact, Canada is engaged in the most gigantic commodity speculation in history and has caused losses of billions of dollars to its farmers.
In the United States, on the other hand, the grain Exchanges, operating freely, have maintained the only undominated markets for cereals in the entire world during and since World War II. While prices have risen sharply as a consequence of extraordinary war demand, drastically disrupted production and transportation facilities, and short post-war crops in Europe, they have not been arbitrarily fixed by government.
On the contrary, prices have been established solely through the interaction of economic forces, the prevailing supply and demand on uncontrolled markets where merchants, producers, converters, consumers, and speculators have been free to sell or buy at will under federal regulation to prevent abuses and unfair practices.
The results have been free prices, fair to both producer and consumer in light of all existing circumstances. In a world in which private trading is rapidly being replaced by State trading in all basic international staples, it is not too much to say that free commodity markets, properly regulated by government to prevent abuses, are the symbols of free societies.
With many nations of the world now accepting State Socialism in some form, it is highly important that the people of the United States realize that State Socialism, whether Communist, Fascist, or Socialist, means the destruction of free markets and their replacement by governmental buying and selling monopolies i.e., exclusive State trading such as is now being practiced not only in Communist countries, but also in England and various South American and European nations.
Commodity Exchanges not only are vital to a free economy, but they serve a much more important function than do Stock Exchanges. The latter are vital to the economic stability of a free society because they give liquidity to the billions of dollars of stocks and bonds that represent the capital investments of the American people in the nation’s productive and distributive machinery upon which depend the general welfare, prosperity, and living standards of all the people.
The Commodity Exchanges, however, not only provide constant liquidity for the basic staple commodities traded upon these Exchanges, but they also perform other vital economic functions which are not served by Stock Exchanges.
Both the state and federal governments are vitally interested in the regulation of Commodity Exchanges to prevent unfair trade practices and other potential abuses contrary to the public interest.
Commodity Exchanges and Futures Trading is not a trade manual or hand-book of technical terms; nor is it an extensive analytical or theoretical treatise on the economic functions of the Commodity Exchange. Rather its primary purpose is to supply a simple, clear analysis of the economic functions, the methods of operation, the trading practices, and the regulation of these Exchanges by the Exchanges themselves and by the federal government.
The objective of the authors has been to produce a book which will be useful to students in college courses on Marketing and, at the same time, meet the needs of the ever-growing users of the Exchanges the producers, merchants, brokers, dealers, commission agents, converters, farm cooperatives, and traders, who are availing themselves of the Exchange facilities more extensively from year to year.
- HISTORICAL DEVELOPMENT OF COMMODITY EXCHANGES
- THE ECONOMIC FUNCTIONS OF COMMODITY EXCHANGES
- SPECULATION A CONSTRUCTIVE ECONOMIC ACTIVITY ON COMMODITY EXCHANGES
- GRADING, STANDARDIZATION, AND INSPECTION
- PUBLICITY OF PRICES, CROP AND MARKET REPORTS, AND OTHER STATISTICS
- COMMODITIES ADAPTABLE TO FUTURES TRADING
- THE FUTURES OR EXCHANGE CONTRACT
- ORGANIZATION AND OPERATION OF A COMMODITY EXCHANGE
- THE CLEARING HOUSE AND ITS RELATION TO THE EXCHANGE
- A TYPICAL TRANSACTION ON THE EXCHANGE
- HEDGING IN PRACTICE
- THE COMMODITY EXCHANGE ACT
- THE LAW OF COMMODITY EXCHANGESRELATIONS WITH THE STATE RELATIONS WITH MEMBERS
- THE LEGALITY OF CLEARING HOUSE OPERATIONS
- THE EXCHANGE AND THIRD PARTIES