A Market Genius

A few weeks ago, my publishing imprint, Ceres Books, released It’s All Speculation by Tom Hieronymus. It is a collection of Tom’s writings across his career that stretched from the late 40s into the mid-90s. A good question is why I would put the time and effort into resurrecting Tom’s work like this. The answer is simple—Tom was a genius when it came to analyzing agricultural markets. The full range of Tom’s market genius is on display in It’s All Speculation. Some know Tom for his classic book Economics of Futures Markets. But, he wrote much more widely than on futures markets during his career, touching everything from the rise of soybean production in the U.S. to the impacts of the adoption of self-propelled combines.

I have a printout of the text of the book where I highlighted many of the insights about markets and prices made by Tom. I know I will return over and over to these insights, which were often stated quite memorably. Here is a sampling:

“…existing corn cribs are mortal. Replacing them is very expensive, and they will not be replaced as they fall down, blow down, or burn down.”

“Primary producers are logical risk bearers—I have particularly observed this fact in grains. They do not really have a great interest in shifting risks to speculators and thus, in effect, producing to contract. The basic reason is that they have a 100 percent equity in the products they sell. Price variation is usually moderate in relation to total value. Thus, the gross returns are not greatly affected by price variation.”

“The burden of what I have said is that the philosophic concept, that hedging is good and speculation is a necessary evil, is wrong. Competitive speculation in major futures markets is a thing of beauty and a joy forever. Legislation with regard to futures trading must recognize this.”

“…there is an inevitability about prices. The forces that go into the determination of price can be suppressed and distorted for a time, but they will eventually surface. This has been the history of every price-controlling scheme.”

It would have been a crying shame if these market insights had been lost to the mists of time. We need them today. I know that reading It’s All Speculation from cover-to-cover was a transformative experience for me personally. It was a bit like going back to the basics of competitive markets in graduate school again. I hope I was infected a bit by Tom’s uncompromising advocacy for free market economics and his unbridled advocacy for market solutions. I am sure that Tom’s professional influence during his lifetime was less than it could have been because he was so blunt in this regard. Hopefully, the publication of It’s All Speculation will help to correct the historical record.