14 TO PREVENT SALE OF COTTON AND GRAIN IN FUTURE MARKETS
take advantage of it as much as they should, and that is one of the
things that we are trying in our investigations to work out and bring
home to them as to how they can utilize those facilities to a better
advantage, and we find that a good many of our complaints with
reference to. transactions in the market come from people who do not
know how to utilize the hedging facilities. I might illustrate that
in this way——
Senator CARAWAY. May I ask you a question? It is your belief
that insurance is the object of everybody that goes onto the exchange
and trades in futures?
Mr. DUVEL. As long as we have the future market, it offers an
insurance feature for their protection, because the futures and the
cash prices move together. Sometimes the cash is at a higher pre-
mium, depending on local demand, but it gives the opportunity to the
dealer, and particularly the country shipper—it gives him an insur-
ance feature which he could not have otherwise, and still maintain
his merchandising profit.
I was going to give an illustration as to how some men sometimes
use this hedging feature, without knowing how to use it correctly.
We had an illustration coming out of one of the Western States,
for example, where the country elevator operator had bought corn
from the farmer, shipped the corn to terminal market and sold it
on the spot market, but by the time he sold it the price had declined
slightly below that which prevailed when he bought the corn from
the farmers. Therefore, he proceeded to buy a future in the market,
which he called a hedge.
The CHAIRMAN. He did not buy it until after he had sold his corn?
Mr. DUVEL. He had shipped his corn to market and sold it in the
terminal market, and then bought his future, which he called a hedge.
He had a little loss on the cash transaction, and called that a hedge,
because he wanted to make an effort to recover his loss. Fortunately
he did, but it was purely a speculative transaction, and no hedge in
any sense of the word.
The CHAIRMAN. Under the grain futures act, is there any way in
which you could prohibit that man from doing just what he did do?
Although he did not know it, he was engaged in a speculative trans-
action, he was engaged in a gamble entirely.
“Mr. DuvEL. He was engaged in a purely speculative transaction in
that instance, although I think at that time he was thoroughly honest
in thinking he was engaging in a hedging transaction.
The CHAIRMAN. Did he violate any law?
Mr. DUVEL. He violated no law.
The CHAIRMAN. Do you feel, from your study of it, that there is
any way to prohibit anyone from doing just what that man did, or
can we prohibit that and still leave legitimate hedging in there.
Mr. DUVEL. There is no way to prohibit that except by a slow
process of education as to how to use a futures market for hedging
purposes.
The CHAIRMAN. Oh, yes; but you do not get the point. You
could educate that man, of course. He was probably an honest man
who did not want to gamble, who did not want to engage in specula-
tion; he was a legitimate dealer. But there are thousands of other
fellows who do not pretend to be legitimate dealers that are dealing in
