Min Bannister
Possessed dog
- Joined
- Sep 5, 2003
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Have you ever thought about what a great idea it would be to trade in onion futures in the USA? Well who hasn't? Unfortunately it is illegal, and here is a brief summary of why.
In 1955, two Chicago onion traders Sam Siegal and Vincent Kosuga bought so many onions and onion futures (an agreement to pay a set price at some point in the future.) that they eventually controlled 98% of the available onion supply there. They bought and stored so many onions that they were eventually able to threaten onion growers to buy their stock, otherwise they would flood the market with excess onions in order to bring the price down. Once the growers began repurchasing onions, Siegal and Kosuga began shorting onions (that is betting on a future price drop on onions - one that they were about to instigate themselves).
Meanwhile, due to the huge stock of onions that were beginning to get mouldy in the onion warehouses, they shipped them elsewhere to be cleaned and repackaged in order to look fresh again. Seeing huge shipments of "new" onions returning to Chicago made other futures traders think there was an even bigger excess of onions than there already was, driving down the price still further. Over a matter of months, the price of a sack of onions had gone down from $2.75 to just 10 cents -less than the price of the bags that held them.
Siegal and Kosuga made millions due to the short selling they had done but many onion growers went bankrupt since they lost so much money buying worthless stock. Some even had to pay to have their stock destroyed.
And meanwhile, due to the original supplies of onions that had been bought in from other states but sold only to Chicago growers, there was a shortage of onions elsewhere in the US...
Legislation was brought in in order to prevent such a thing happening again. And that ladies and gentlemen, is why it is now illegal to trade in onion futures in the US!
Here is the Wikipedia entry which I have summarised:-https://en.wikipedia.org/wiki/Futures_contract
I heard about this on the iilluminaughtii podcast. You can search for this on your podcast platform or it is available from Youtube. The onion section starts at about 15 minutes.
In 1955, two Chicago onion traders Sam Siegal and Vincent Kosuga bought so many onions and onion futures (an agreement to pay a set price at some point in the future.) that they eventually controlled 98% of the available onion supply there. They bought and stored so many onions that they were eventually able to threaten onion growers to buy their stock, otherwise they would flood the market with excess onions in order to bring the price down. Once the growers began repurchasing onions, Siegal and Kosuga began shorting onions (that is betting on a future price drop on onions - one that they were about to instigate themselves).
Meanwhile, due to the huge stock of onions that were beginning to get mouldy in the onion warehouses, they shipped them elsewhere to be cleaned and repackaged in order to look fresh again. Seeing huge shipments of "new" onions returning to Chicago made other futures traders think there was an even bigger excess of onions than there already was, driving down the price still further. Over a matter of months, the price of a sack of onions had gone down from $2.75 to just 10 cents -less than the price of the bags that held them.
Siegal and Kosuga made millions due to the short selling they had done but many onion growers went bankrupt since they lost so much money buying worthless stock. Some even had to pay to have their stock destroyed.
And meanwhile, due to the original supplies of onions that had been bought in from other states but sold only to Chicago growers, there was a shortage of onions elsewhere in the US...
Legislation was brought in in order to prevent such a thing happening again. And that ladies and gentlemen, is why it is now illegal to trade in onion futures in the US!
Here is the Wikipedia entry which I have summarised:-https://en.wikipedia.org/wiki/Futures_contract
I heard about this on the iilluminaughtii podcast. You can search for this on your podcast platform or it is available from Youtube. The onion section starts at about 15 minutes.