Part 17 (1/2)

When Jones & Brown are ”called” for deposit margins they drop everything and obey. They have just fifteen minutes to reach the bank with that cheque, have it ”marked” and rushed to the Clearing House.

If they fail to arrive with it the Manager of the Clearing House will step into their office and if there were any ”hemming and hawing” Jones & Brown would be reported at once to the Secretary of the Exchange who would call a hurry-up meeting of the Exchange Council and Messrs. Jones & Brown would find themselves posted and all trades with them forbidden.

All clerical errors in regard to trades are checked up by the Clearing House and fines paid in for mistakes. Only a nominal charge is made for its services--enough to pay overhead expenses--but the fines have enabled the Clearing House to acc.u.mulate a large Reserve Fund which gives it financial stability to provide for all responsibilities should occasion arise through failure of any firm. All futures which have not been cancelled before delivery date are negotiated through the Clearing House and with its a.s.sistance the grain can be placed just where it should go and tremendous quant.i.ties of it are handled without a hitch and with the utmost despatch.

Excitement in the Pit is not always over wheat. It may be oats. It was Canadian Western Oats which became the storm centre in 1911 when the Grain Growers got into difficulty with the ”bears.” Traders who attempt to boost prices are known as ”bulls”; those who are interested in depressing the market are ”bears.” A trader may be a bear to-day and a bull to-morrow; thus the opposing groups are constantly changing in make-up and the firm which was a chief opponent in yesterday's trading may be lined up alongside the day following, fighting with instead of against. It is all in the day's business and the strenuous compet.i.tion on the floor, into which the uninitiated visitor reads all manner of animosity and open anger, is a very misleading barometer to the actual good feeling which prevails.

In recording what now took place in the Pit in connection with the farmers' commission agency it will be well to remember that the rest of the traders would have acted in the same way toward any firm which was fool enough to leave the opening for attack. It may be that as the thing developed some of those who were specially interested in the downfall of the farmers' organization seized the opportunity to ride the situation beyond the pale of business ethics and in their eagerness to be ”in at the death” revealed special vindictiveness. But in view of the long struggle with this element it was only what the Grain Growers should have expected when they ran their heads deliberately into the noose.

The situation was this: Shortly after New Year's the export demand for Canadian Western Oats became heavy and it looked as if in Great Britain and all over Europe, where the oat crop had been small, there would continue to be a shortage of oats. In spite of this situation, however, no sooner was the proposed reciprocity agreement reached between the Canadian and United States governments of the day, on January 26th, than market prices began to go down.

The then Manager of the Grain Growers' Grain Company came to the conclusion that this price lowering was a local condition and that the export market for oats was too strong to justify it or sustain it.

”I'll just step into the market and buy some oats,” said he. ”Later on I'll sell for export at a satisfactory figure.” Accordingly, one fine morning he went into the Pit and began to buy.

The Manager's motive in attempting to sustain the market may have been of the best; but it was the first time that such methods had been attempted by the Grain Growers--methods which were not at all in keeping with the avowed principles of the Company. The Board of Control had every confidence in their Manager and, although he was merely a salaried employee and not an executive officer, he had been given a pretty free hand in the conduct of the Company's operations.

Apparently it did not occur to him that he should consult the Board before entering the market on a speculative basis. Had the Board known what he was about to do they would have vetoed it; but when they did discover what was afoot it was too late to prevent the situation. It developed very swiftly.

”The Grain Growers are up to the neck in May oats,” was the whisper which pa.s.sed about among the other traders. That was all that was necessary.

”Sell May oats! Sell May oats!”

On every side of the Pit they were being offered by thousands of bushels--five--twenty-five--fifty thousand! The idea was to load up the Grain Growers' Grain Company to the point where their line of credit with the Clearing House would become exhausted, after which every bushel would require a marginal deposit. Then when the Company could carry no further burden the Clearing House would be forced to dump back the oats onto the market, breaking it several cents per bushel. At this lower price the traders who had obligated themselves to make these big deliveries would buy back the necessary supply of oats at a profit and everything would resume the even tenor of its way--except the Grain Growers, of course. Their serviette would be folded. Their chair would be pushed back from the table! They would be _through_!

Up until now all the troubles of the farmers in marketing their own grain may be said to have come from sources outside themselves; but in the present instance they had n.o.body to blame but themselves for the predicament. It arose at a time, too, when the other grain dealers were beginning to recognize the farmers as a force in the grain market--a force which had come to stay. It was unfortunate, therefore, that just as they were beginning to acquire a standing as a solid and sensible business concern, the Grain Growers' Grain Company should find themselves driven into a corner, their backs to the wall, the focus of pointing fingers and gleeful grins.

The fact that a salaried employee, not an officer of the Company, had acted on his own initiative without the consent of the directors was no excuse for a reliable business concern to tender as such. The first question flung back at them naturally would be: ”Then your 'Board of Control' doesn't control, eh?” For although the Board of Control did not know what their Manager was doing until it was too late to prevent it, they should have known. That is what they were there for--to protect the shareholders from managerial mistakes.

However, there they were. The only thing they could do was to fight it out to a finish in the Pit and, if they survived, to see that no similar mistakes occurred in the future.

All sorts of rumors were flying about the corridors of the Exchange, gathering momentum as they pa.s.sed from lip to lip, swelling with the heat of the excitement until it was a general guess that the Grain Growers must be loaded with anywhere between five and eight million bushels of oats more than they had been able to sell.

It was only a guess, though, and a wild one. Many traders would have given a good round sum to know exactly how the farmers' company stood on the books of the Clearing House. Only the Clearing House and the Company itself knew the true figures and the Clearing House officials were men of the highest integrity who dare not be approached for secret tips.

Thanks to the splendid export connection which had been built up in the Old Country and to the equally solid financial relations with the Home Bank, the farmers' agency was selling oats for export very rapidly. It began to look as if they would get out from under the threatening avalanche without much loss, if any.

The Company's old-time enemies apparently saw an opportunity to undermine its credit at this crisis; for attacks began to appear in print--accusations of speculation, of official negligence and so forth.

If the Grain Growers could be prevented from paying for the large quant.i.ty of oats, delivery of which they would have to take on May 1st to complete the export sales made during the winter--if they could be made to fail in filling these export orders when navigation opened, they would be smashed.

But in attacking the credit of the Grain Growers, these opponents overlooked the rapid increase in paid-up capital and the ability of the farmers to secure money outside of Winnipeg. It was not being forgotten by the Grain Growers that upon the first day of May there would be delivered to them over 2,200,000 bushels of oats.

When the day arrived, therefore, the money was on hand to meet every contingency. Every bushel was paid for immediately. Within a few weeks half of the quant.i.ty was riding the waves of the Atlantic, bound for the Old Country to fill part of the sales already made there.

Before long some of the grain companies which had sold the oats were trying to buy them back. Had the farmers' company been a speculating firm they might have turned upon the market and cornered the oats with a vengeance. It was one of those rare occasions when a corner could have been operated successfully to a golden, no-quarter finish; for the export demand was sustained and the local market could have been made to pay ”through the nose” for its fun.

CHAPTER XVII

NEW FURROWS

Fishes, beasts and fowls are to eat each other, for they have no justice; but to men is given justice, which is for the best.--_Hesiod_.