F98? ffe9 ©1960 Mimir Publishers, Inc.

LI B R.ARY OF THE

UN I V E R S ITY Of ILLI N O I S

332..Co<\

F°>8 p * 1953

AGRlCtltTutC

©1960 Mimir Publishers, Inc.

©1960 Mimir Publishers, Inc.

©1960 Mimir Publishers, Inc.

FUTURES TRADING SEMINAR

HISTORY AND DEVELOPMENT

Principal papers by:

Henry H. Bakken Roger W. Gray Thomas A. Hieronymus Allen B. Paul

First Edition Vol. I

Mimir Publishers, Inc.

Madison, Wisconsin

1960

[ i i i ]

©1960 Mimir Publishers, Inc.

Copyright 1960 by the

BOARD OF TRADE of

the City of Chicago

Chicago, Illinois

Published by Mimir Publishers, Inc.

Madison, Wisconsin

Printed in the U. S. A. by Worzalla Publishing Company

Stevens Point, Wisconsin

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©1960 Mimir Publishers, Inc.

SEMINAR PARTICIPANTS

GEORGE ABSHIER Agricultural Extension Service, Oklahoma State University Stillwater, Oklahoma

VICTOR D. BENDEL, Victor D. Bendel Co., Chicago, Illinois

BRUCE L. BROOKS Agricultural Extension Service, Washington State College, Pullman, Washington

ARDIN P. BUELL John G. McCarthy Co., Chicago, Illinois

DALE BUTZ Illinois Farm Supply Company, 100 East Ohio Street, Chicago, Illinois

BERNARD P. CAREY Second Vice Chairman, Chicago Board of Trade

W. S. FARRIS Department of Agricultural Economics, Purdue University, Lafayette, Indiana

GERALD GOLD Commodity Research Bureau, Inc., 82 Beaver Street, New York 5, New York

STANLEY JONES

President, Winnipeg Grain Exchange, Winnipeg, Canada

FRANK A. JOST, JR.,

Dean Witter & Co., Chicago, Illinois

LEON T . KENDALL U. S. Savings & Loan League, 221 North La Salle Street,

Chicago, Illinois

WARREN W. LEBECK

Secretary, Chicago Board of Trade

R O B E R T C. LIEBENOW, President, Chicago Board of Trade

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©1960 Mimir Publishers, Inc.

WENDELL McKINSEY Department of Agricultural Economics, University of Mis­

souri, Columbia, Missouri FRED MAYWALD

Manager, Grain Department, Farmers Grain Dealers As­sociation, Des Moines, Iowa

ROBERT MITCHELL College of Commerce, University of Illinois, Urbana, Il­linois

HOWARD RIES Oscar Mayer & Co., Madison, Wisconsin

CLARENCE ROWLAND, JR. Chairman of the Board, Chicago Board of Trade

ROBERT SCHMELZLEE Portland State College, Portland, Oregon

C. P. SCHUMAIER Department of Agricultural Economics, University of Il­linois, Urbana, Illinois

ORLO SORENSON Department of Agricultural Economics, Kansas State Uni­versity, Manhattan, Kansas

FRED TAYLOR Department of Agricultural Economics, North Dakota Ag­ricultural College, Fargo, North Dakota

SAMUEL G. WENNBERG Department of Economics 2c Business Administration, Uni­versity of Missouri, Columbia, Missouri

WILLIAM T. WESSON Agricultural Marketing Service, U. S. Department of Ag­riculture, Washington 25, D. C.

WALLACE O. YODER Department of Marketing, School of Business, Indiana University, Bloomington, Indiana

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©1960 Mimir Publishers, Inc.

FOREWORD

Futures markets play a key role in marketing and pricing some of our more important agricultural commodities. This role is a changing one. Increasingly numerous and complex developments are affecting the services demanded of futures markets. Some changes are within agriculture, some with­out. T o some extent commodity exchanges such as the Chi­cago Board of Trade may modify and help shape changes in our marketing facilities and techniques. Such institutions are also influenced by forces outside their control and, as a consequence, must seek new ways of providing more useful marketing services.

The program at which the papers and discussions in this volume were presented was an attempt to assess the role and function of futures markets in our changing and developing agricultural economy.

Specifically, the 1959 Futures Trading Seminar attempted to identify the important forces influencing futures markets and to help determine what might be done to enable futures markets to increase their contribution toward a more efficient and effective agricultural marketing system. The first pre­sentation reviewed and analyzed the role and function of fu­tures trading as these have developed historically. The next two sessions focused attention on two important functions of futures trading, risk shifting and pricing. The final ses­sion was designed to' evaluate the future of futures markets in our changing agricultural economy.

In planning the program, the Educational Advisory Com­mittee secured qualified and capable speakers, discussants, and seminar participants who had a particular interest in grain marketing. As a result, the committee feels the quality of the analyses was very high. Differences of opinion were

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©1960 Mimir Publishers, Inc.

inevitable. The subjects were discussed by competent and interested students of futures markets at levels where existing knowledge had not previously provided conclusive answers. The committee is confident that this book presents an im­portant contribution to the literature on futures trading. It should appreciably extend the boundaries of knowledge; and perhaps, one of its main values will be that of defining some frontiers for future work. This volume should be par­ticularly useful to educators, researchers, and trade people in­terested in an analytical discussion of futures markets.

The Educational Advisory Committee carried major re­sponsibility in planning and conducting the Seminar, and was particularly appreciative of the freedom it experienced in planning the program. The committee was aided by Chicago Board of Trade personnel in selecting the industry discus­sants, and wishes to thank Mr. Irwin B. Johnson, Director of Public Relations, and Miss Anne Holden, Editor of the Chi­cago Board of Trade News, for the excellent assistance and cooperation they gave with regard to arrangements and publicity for the Seminar. Finally, the Educational Advisory Committee especially wishes to express its gratitude to the Exchange, its Public Relations Committee, and to Mr. Robert C. Liebenow, President of the Chicago Board of Trade, for support and cooperation which made the event possible.

Lafayette, Indiana Paul L. Farris, Chairman April 15, 1960 Educational Advisory Committee

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©1960 Mimir Publishers, Inc.

EDUCATIONAL ADVISORY COMMITTEE

OF T H E CHICAGO BOARD OF TRADE

1959

Paul L. Farris, Chairman Professor of Agricultural Economics, Purdue University

James R. Enix Extension Wheat Marketing Specialist, Oklahoma State University

T . A. Hieronymus Professor of Agricultural Marketing, University of Illinois

Taylor W. Meloan Chairman, Department of Marketing, Transportation and Foreign Trade, University of Southern California

Charles W. Miller Director, Department of Marketing, Marquette University

Ross Milner Extension Economist, Grain Marketing, Ohio State Uni­versity

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©1960 Mimir Publishers, Inc.

©1960 Mimir Publishers, Inc.

CONTENTS

Foreword VII

Part I.

Historical Evaluation, Theory and Legal Status of Futures Trading in American Agricultural Commodities

Speaker: Henry H. Bakken, 3 University of Wisconsin

Discussants: James S. Schonberg, 29 Uhlmann Grain Company

John W. Sharp. Ohio State University .. 39 John D. Black, Harvard University 43

Discussion 49

Part II.

The Importance of Hedging in Futures Trading; and the Effectiveness of Futures Trading for Hedging

Speaker: Roger W. Gray 61 Stanford University

Discussants: James P. Reichmann, 83 Chicago Board of Trade

C. Peairs Wilson, 87 Kansas State University

Richard Phillips, 93 Iowa State University

Discussion 99

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Part III.

Effects of Futures Trading on Prices

Speaker: Thomas A. Hieronymus 121 University of Illinois

Discussants: Richard M. Withrow, 163 Lamson Bros. & Company

Reynold P. Dahl, 173 University of Minnesota

Geoffrey S. Shepherd, 181 Iowa State University

Discussion 192

Part IV.

The Future of Futures Trading in Our Changing Agriculture

Speaker: Allen B. Paul, 203 U. S. Department of Agriculture

Discussants: Walter M. Goldschmidt, 245 Continental Grain Company

Leonard W. Schruben, 253 Kansas State University

Adlowe L. Larson, 257 Oklahoma State University

Discussion 262

Bibliographical References Cited 273

Index 277

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©1960 Mimir Publishers, Inc.