Although Kara Newman’s The Secret Financial Life of Food: From Commodities Markets to Supermarkets (Columbia University Press, 2013) has an enticing title, it doesn’t divulge any secrets. Instead, it is a rather jagged history of U.S. agricultural futures markets. Each chapter focuses on a particular commodity or group of commodities: corn; grains; butter and eggs; coffee, sugar, and cocoa; cattle; pork bellies; produce such as apples, onions, potatoes, tomatoes, and orange juice; and soybeans. At the end of each chapter is a brief section entitled “What Trades Now” with a snapshot of the commodity’s use, what exchange it trades on, and its contract size.
Newman’s book includes a series of vignettes, replete with larger than life, sometimes shady characters. Take, for instance, “Tino” De Angelis, who was “the brains behind the Great Salad Oil Swindle [of the early 1960s], which ultimately bankrupted twenty banks and commodities and securities firms, including an American Express unit, and caused losses in the hundreds of millions of dollars.” (p. 146) Or Peter McGeoch, the lord of lard, who, following the crash of the lard market, shot himself. Or Jack Richard Simplot, the Idaho potato king, who sold millions of dollars of Maine potato futures and, at expiration, could not deliver the requisite 49,850,000 pounds. This “great potato panic” resulted in the CFTC’s banning the trading of potato futures indefinitely, “effectively wiping out NYMEX’s most prosperous business.” (p. 134)
And then there was the onion scandal. In the early 1950s “eggs and onions were the [Merc’s] primary markets.” But not for long. A spectacular market-fixing incident engineered by a Chicago trader and a New York trader managed to push down “the price of a 50-pound bag of onions from $2.55 to 10 cents between August 1955 and March 1956.” In the process the two traders double-crossed some major onion growers in Michigan, who turned to Congress for regulatory action. “Despite a strenuous outcry from the Merc and a public relations effort aimed at showcasing the benefits of onion futures, Congress, in 1958, amended the Commodity Exchange Act to abolish the onion market. … [T]rading onion futures became a misdemeanor under federal law.” (pp. 129-132)
Commodity futures, of course, come and go. I, for one, mourned the demise of the pork belly contract in 2011. Whiskey never made it to a formal exchange, even though “on the opening day of the New York’s Produce Exchange [in the mid-nineteenth century], the New York Times published a trade table listing, among other products, 1,010 barrels of whiskey at 19 cents a gallon.” (p. 56) The high-fructose corn syrup market lasted only two years (1987-88). The contract for frozen eggs, introduced in 1949, ceased trading in the 1970s, and egg trading as a whole eventually “sputtered to a full stop.” (p. 74)
Those who are interested in the history of the “food” commodity markets will find many treats in Newman’s book. It is not a definitive history, but it’s worth a read nonetheless.