The Chicago Board of Trade

Natalie Webb
Brookwood Junior High School, Glenwood

The Chicago Board of Trade, located on West Jackson Street in Chicago, is a connection to agriculture that affects the everyday consumer of farm products. Since its beginning in 1848, the Chicago Board of Trade has grown to be one of the largest agriculture exchanges in the world.

After the 1830s Chicago started to expand, and the city experienced growth in grain trading as well. Chicago was an ideal place to distribute produce from the prairie. In March 1848 a group of Chicago merchants held a preliminary meeting in the office of W. L. Whiting. They thought that selling farm merchandise should be more organized and standardized than it was. At the second meeting, the Chicago Board of Trade was formally organized. Thomas Dyer was elected the first president. The following year, the board was granted a charter that gave official authority to its acts. With a common meeting ground where buyer and seller got to make their trades, growers began to receive a fairer return for their efforts in the fields. Merchants received better quality products from a central location. Prices of farm products throughout the Midwest began to stabilize for the first time.

In 1865 the Chicago Board of Trade took steps to formalize grain trading by developing standardized agreements, called futures contracts. Futures are contracts on agriculture commodities that are bought or sold and received or delivered on different dates. By the late nineteenth and early twentieth centuries, growth in futures trading increased as more and more businesses adopted the practice. Today, trading in futures constitutes the principal function of the Chicago Board of Trade. Futures markets are maintained for wheat, corn, oats, rye, barley, provisions, and stocks and bonds. The cotton and securities markets have been added within recent years. The biggest trades and best values in recent years at the Chicago Board of Trade have been soybeans and soybean oil, corn, wheat, and silver.

The Chicago Board of Trade has helped businesses and individuals buy and sell their farm goods. In the 1870s the Chicago Board of Trade organized the purchase and sale of the mountains of grain that had paused momentarily in the city on their way from the farm. Almost sixty million bushels of grain were handled after 1870. Grain was brought into Chicago and shipped on trains and boats to locations around the world. On the trading floor of the Chicago Board of Trade, are the grain pits, surrounded by batteries of telephones and electronic instruments. To the average spectator, the pit is a madhouse; the frantic signals and the constant roar of the traders seem meaningless. The roar, however, is nothing less than the throb of America's agricultural industry. Exchange members are the only people able to trade for the buyers and sellers. The customer, either the buyer or seller, communicates to the floor their purchase or sale order. Finally, the exchange member completes the order and communicates the transaction to the customer. The Board of Trade broadcasts quotations from the Chicago market by radio six times a day. Farmers in even the most isolated communities are constantly informed of the market and can act accordingly. Other radio stations, including one of the most powerful in Europe, relay to the world the price of grain that Chicago traders pay. The price a person pays for goods and services depends largely on how successful businesses manage risk. By effectively using the futures markets at the Chicago Board of Trade, businesses and individuals can minimize their risk, which, in turn, low-

The original Chicago Board of Trade Building was replaced by the one pictured on the front cover. Half of the nations commodities trading takes place in the pit of the Chicago Board of Trade.

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ers their cost of business. This helps keep prices low for the consumer. As the world's business continues to evolve, the Chicago Board of Trade will continue to create new products and instruments to meet the demands of an increasingly competitive industry, and this will help businesses and individuals worldwide better manage their price risk and keep prices low.

The Chicago Board of Trade is organized as a not-for-profit membership association. It has several types of memberships, each having access to all or some of the contract markets designated at the exchange. Merchants, exporters, bankers, millers, elevator owners, cooperative farm groups, brokers, and insurance companies are members. The Chicago Board of Trade's growth is due largely to one outstanding fact. It markets the farmer's grain at a lower cost than the marketing of any other staple foodstuff.

The Chicago Board of Trade has grown greatly over the years. The Board of Trade today ranks first among the world's commodity exchanges because some four hundred million bushels of grain flow from producer to consumer annually. Its charter membership of 82 has grown to 3,600. The Board of Trade consists of a Board of Directors that includes a chairman, first vice chairman, second vice chairman, eighteen member directors, four public directors, and the president. Rules and regulations of the Chicago Board of Trade are extensive and are designed to support competitive markets. The Chicago Board of Trade does one-half of all the nation's commodity trading. The Chicago Board of Trade is among the world's largest commodity markets and has led in the development of futures trading and related concepts.—[From Glenn Bishop, Chicago's Accomplishments & Leaders; Emmett Dedmon, Fabulous Chicago; Michael Edgerton and Kenan Heise, Chicago; Harry Hansen, Illinois; Harold Mayer and Richard Wade, Chicago; Chicago Board of Trade, www.cbt.com.]

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