The Only Crop Banned From The Futures Trading Market In The United States Is?
Onions probably strike you as a rather boring vegetable, not particularly exotic, nor particularly enticing on their own (rare is the person that wants a big crisp bite of a fresh uncooked onion). The onion seems, frankly, like the vegetable crop least likely, this side of the potato, to start a scandal that leads to regulatory action.
Yet in the 1950s, that’s exactly what happened thanks to two onion traders, Sam Siegel and Vincent Kosuga. In 1955, the pair cornered the onion futures market in the Chicago Mercantile Exchange by buying huge amounts of onions. How huge? By the end of 1955, they had purchased enough onions and onion futures so that they controlled 98 percent of the onion market and millions of pounds of onions were shipped to their warehouses in Chicago. At peak holdings, they had 30,000,000 pounds of onions sitting in storage. They then turned around and forced onion growers to purchase their inventory by threatening to flood the market with onions if they did not.
The resulting political and market turbulence led to wild fluctuations in the price of onions, bankrupted many onion farmers, and caused such a public outcry that it became a national issue drawing the attention of government agencies (the U.S. Senate Committee on Agriculture and the House Committee on Agriculture) and then Congressman (and future President) Gerald Ford. A bill was drawn up banning the trading of onion futures and was signed into law by U.S. President Dwight Eisenhower in 1958. Despite protest from the Chicago Mercantile Exchange that the bill unfairly targeted a large portion of their market (onion stock and futures made up 20 percent of their trading at the time), a federal judge upheld the bill. They didn’t push the issue forward to the Supreme Court and the bill remains in effect to this day.