The Pungent Plot: The Intriguing Story of the 1955 Onion Market Corner
In the history of market manipulation, few examples are as bizarre and fascinating as the Great Onion Market Corner of 1955. At the story’s heart are two key players: Samuel Siegel and Vincent Kosuga, charming entrepreneurs who thought they had concocted the perfect scheme to corner the vast, pungent world of onions. In this blog post, we’ll delve into the daring exploits of these two men, explore the consequences of their actions, and examine the lasting impact their scheme had on the world of commodities and futures markets.
The Unlikely Onion Conspirators: Sam Siegel and Vincent Kosuga
Samuel Siegel was a young but experienced commodities trader from Chicago, while Vincent Kosuga, known as “the Onion King,” was a New York farmer, businessman, and talented gambler. Although the two men may have seemed an unlikely pair, their shared ambition and deep knowledge of the onion market created a formidable partnership.
Plotting: Cornering the Onion Market
Siegel and Kosuga’s plan to corner the onion market relied on controlling its supply and the futures contracts for onions. Their strategy: buy up a significant volume of onions and then manipulate the market by releasing — or withholding — their stockpile. Simultaneously, the duo would bet heavily on the future value of their holdings by taking massive positions in onion futures contracts.
They needed two key components to make this work: storage space and capital. They began by leasing vast storage facilities in the Chicago area and then accumulated a massive stockpile of onions. By late 1955, they owned 98% of the onion supply in the Chicago Mercantile Exchange!
The Impact: Onion Prices Skyrocket
The audacious scheme initially succeeded, as the traders managed the supply of onions, causing the futures prices to rise. By doing this, they could cover their vast long positions in the market. However, their scheme soon unraveled as their manipulative actions became increasingly evident. Nevertheless, market participants were not blind to the fact that these two men held virtually the entire supply of onions, and rumors of price-fixing began to swirl.
Eventually, the market prices for onions skyrocketed, reaching levels 500% higher than they had been just months earlier. Onion farmers across the Midwest, rattled by the extreme price fluctuations, suffered the consequences of ruined crops and financial loss.
The Aftermath: The Onion Futures Act
Reacting to the market chaos, a group of outraged farmers approached U.S. Representative Gerald Ford (who would later become the 38th President of the United States), urging him to intervene. The farmers’ pleas culminated in the introduction of the Onion Futures Act, which was ultimately passed on August 28, 1958. The new law effectively ended onion futures trading in the United States, becoming its first and only restriction.
As for Siegel and Kosuga, their bold attempt to corner the onion industry was laid bare. Although both men faced fines and disciplinary action from the Commodity Exchange Authority, they continued to operate in other commodity markets with varying degrees of success.
Reflecting on the Onion Market Corner
The 1955 Onion Market Corner is an intriguing reminder of the potential impact of manipulation in commodity and futures markets. It also highlights the vigilance and intervention required to limit the influence of market participants on prices.
Since then, the Onion Futures Act has gone a long way in protecting consumers and producers from unscrupulous practices. Unfortunately, as a result, modern-day speculators have been forced to look elsewhere for profitable opportunities, leaving onions free to be enjoyed as one of the most beloved ingredients worldwide.
