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In the mid-19th century, Chicago became a major hub for the grain trade, thanks to the establishment of grain elevators, a grading system, and the creation of a regulated central market governed by the Board of Trade. These developments revolutionized the way grain was bought and sold, turning it into an abstract commodity that could be traded without the physical product needing to move. Grain elevators in Chicago functioned like banks, where farmers and shippers would deposit their grain and receive a receipt that could be redeemed for grain in the future. The flow of grain through these elevators was so enormous that people could rely on them to always have enough grain to back up their receipts.

The development of the telegraph in the same period further contributed to the growth of Chicago’s grain market. The telegraph allowed for more efficient communication of commodity prices, resulting in eastern and western markets moving more closely in tandem. Traders with better access to telegraph news were in a better position to gauge future price movements. The Chicago Board of Trade, the city’s leading grain market, began posting telegraph messages and daily market reports from other cities. The telegraph also made markets more efficient, as it quickly disseminated information, reducing the chance of acting on bad information. The wider the telegraph’s reach, the more it unified previously isolated economies.

With the combination of grain elevators, grading systems, and the telegraph, Chicago’s grain market gave rise to the futures market. Futures contracts allowed traders to buy and sell grain that they did not yet own, with the belief that they could buy the grain before the contract fell due. This speculative market allowed traders to profit from predicting future price movements. Futures contracts were essentially interchangeable, and the contracts could be completed without the physical grain needing to move. The futures market further abstracted grain by trading it as a commodity without its physical identity.

While the futures market brought new opportunities for speculation, it also created new risks and challenges. One of these challenges was the phenomenon of “corners,” where a group of speculators would buy enough futures contracts to control the market and force bear speculators to fulfill their contracts at inflated prices. Corners distorted the market and disrupted trading, and they exposed the weaknesses of the futures market.

Amidst the growth and innovations of the Chicago grain market, there were also concerns and disputes about the boundaries and operations of the market. Farmers and grain traders often accused elevator operators of fraudulent practices, such as dishonest grading, mixing different grades, and issuing counterfeit elevator receipts. These accusations led to calls for regulation and reform, culminating in the passing of the Warehouse Act of 1871 and the establishment of the Railroad and Warehouse Commission. These regulations sought to address issues such as grading, inspection, mixing, and the monopoly power of elevator operators. Although some of the regulations proved to be ineffective, the reforms laid the foundation for future regulation of the grain trade.

The developments in the Chicago grain market reflected a tension between the abstract nature of commodities and the physical realities of grain production. The market’s abstractions allowed for more efficient trading, but they also created opportunities for fraud and manipulation. The market’s success relied on the constant connection between the market and the physical grain, as ultimately, grain supply and demand determined market prices. Chicago’s grain market epitomized the concept of “second nature,” where the market order imposed its own boundaries and vocabulary on the natural world of grain production.

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