TO PREVENT SALE OF COTTON AND GRAIN IN FUTURE MARKETS 27
o Europe for acceptance to-morrow morning. Now, he does not
now how much of that is going to be acceptedy but the acceptance
as come through by cable in the morning, and he finds he has sold
300,000 bushels for export. He has not the wheat because he can not
fford to carry that wheat and pay the storage and insurance charges,
s a general rule, but he recognizes the fact that this wheat is moving
o market in a constant stream every day, and that he will be able
o go into the open market and pick up this wheat. Therefore the
rst thing he does when he gets that acceptance the following morn-
ing is to go into the market and buy a future. That assures him his
erchandising profit. If it happens that the market in the morning
happens to be a little stronger, he, of course, has lost part of his
rofit but he must take that chance, but when he buys that future of
00,000 bushels, then he has determined his merchandising profit.
Now he has bought this grain and sold this grain to Europe, we
will say, for shipment in 60 days. In 30 days from now he starts i
pick up his cash wheat. He goes into the market at the end of 30
days and buys 50,000 bushels. As he buys that 50,000 bushels he
takes off his hedge by selling a like amount of future, because he has
ulfilled that part of the contract, and gradually he has worked it off
in that way, and he still has his merchandising profit.
The same way with the miller. If the miller makes a contract for
the sale of flour for 60 days or 90 days in advance, or whatever it is,
e has not the wheat, but he buys a future as a hedge, and hedging, of
course, may be either buying or selling, but when it comes time to
fulfill that contract and when he has accumulated his wheat, then he
disposes of his future.
Senator CARAWAY. May I ask you a question? Have you ever
given any thought, Doctor, to this phase of the so-called hedging
market? If it was not possible to hedge the men who were dealing
in wheat would have to go to the farmer and buy, would they not,
r to the elevator, or somewhere?
Mr. DUVEL. Somewhere; yes, sir.
Senator CARAWAY. Somebody has got to carry that wheat until
he gets ready to take it? .
Mr. DUVEL. Somebody has to carry it.
Senator CARAWAY. Yes; and as he can now hedge he can trade in
millions of bushels for future delivery without actually being in the
market for a single bushel of wheat?
Mr. DUVEL. That is possible; yes.
Senator CARAWAY. And therefore the farmer or somebody must
carry that wheat until he shall decide that he will take it up on his
future contract and either mill it or hedge it.
Mr. DUVEL. Yes, sir.
‘Senator CARAWAY. And that results in a stagnated market for
actual wheat, does it not? _
Mr. DUVEL. I would not say so.
Senator CARAWAY. Would you say it does not?
Mr. DUVEL. That is, the actual wheat keeps moving in an almost
constant stream.
Senator CARAWAY. It would move a good deal faster if the man
ho is fixing to export 300,000 bushels had to get the actual whea
