When I scrolled through the pictures and videos from yesterday’s demonstration in front of the CME, I honestly could not believe my eyes. A group of University of Chicago students took to the sidewalk, demanding the return of onion futures trading. My first thought was that this could not possibly be real. I figured it was another AI-generated joke, and an elaborate one at that. Then I found their webpage, UChicago for Our Future, and realized these students were dead serious about being funny, or maybe funny about being serious. Either way, I was delighted.
For those who haven’t read Chapter 10 of my book “Back to the Futures,” titled The Onion Crying Game, here is the short version. In the 1950s, Vincent Kosuga and Sam Siegel were alleged to have cornered the onion market at the Merc. Outraged growers demanded action. A young congressman from Michigan named Gerald Ford led the charge, and in 1958 President Eisenhower signed Public Law 85-830. It was the first and only time that the U.S. Congress has banned trading in an active futures market. The CME president, E.B. Harris, summed it up perfectly: burning down the barn to find a suspected rat is a pretty drastic remedy. It was a near-death experience for the CME because the onion contract was its most active market in the 1950s.
The academic verdict came quickly. In his classic 1963 article “Onions Revisited,” Roger Gray showed that seasonal swings in onion prices got worse, not better, after the ban. Holbrook Working found that during the years of active futures trading, onion prices fluctuated an average of about 20 cents over a season. Before the futures market existed, the average swing was $1.19, and after the ban it was 90 cents. That means price swings were four to six times larger without a futures market. Growers got lower prices at harvest, consumers paid more in the spring, and everyone lost.
Nearly 70 years later, the ban is still on the books. That is why it is so refreshing to see a younger generation that not only knows about this blasphemy against markets but is willing to step out and mock it in good humor. The Anti-Speculation Cycle keeps coming back because bad ideas never die. It helps when someone shows up with signs and a sense of humor to remind us how silly this one was. To the UChicago students: well done. I am sure that Milton Friedman is smiling somewhere. Free the onion, indeed!
Laurence J. Norton Chair of Agricultural Marketing
University of Illinois at Urbana-Champaign