Bulk handling was preceded by two innovations in trading.
Thefirst innovation was the establishment of the Chicago Board of Trade in
1848, moving transactions from offices, warehouses, and bars to a central
location (Cronon 1992, p. 115). Traders began to take samples to the board,
where they would arrange contracts between buyers and sellers. The larger the
volume of wheat traded and the greater the number of trades, the more
efficient the market would become.
The second trading innovation occurred in 1856 when the board began
regulating the quality of wheat. The introduction of three grades—white
winter wheat, red winter wheat, and spring wheat—would, according to
historian William Cronon,‘forever transform the grain trade of the world’
(Cronon 1992, p. 116). At a stroke, one of the greatest logistical challenges for
shippers—separating consignments from each producer and tracking their
progress through to sale—was overcome. Farmers would deliver their harvest
to the warehouse and would be issued with a receipt for the value of the same
quantity of equally graded grain. As Henry Crosby Emery notes:‘the develop-
ment of a system of grading and of elevator receipts is the most important step
in the history of the grain trade’(Emery 1896, p. 38). Cronon observes that the
development would‘sever the link between ownership rights and physical
grain, with a host of unanticipated consequences’(Cronon 1992, p. 116).
One result was better grain, since farmers and shippers had afinancial
incentive to improve the quality of their wheat. Dirty wheat, or consignments
bulked out with oats or chaff, became less common. The Board developed its
own rigorous inspection programme, which in time would be recognized by
civil courts. Grading also served as means of inventory control that made bulk
handling possible. It allowed the introduction of elevators; vertical ware-
houses storing loose grain located adjacent to railways, no more than a day
by horse power from the farm. Bagging would become redundant. Transport-
ing loose grain in railway box cars was less laborious and more efficient. Faster
loading reduced the amount of down time for rolling stock.
An agreed standard for graded wheat encouraged greaterfinancial complex-
ity. Traders could sell not just physical wheat but wheat that was yet to be
harvested. When the telegraph arrived in Chicago in 1848, the transmission of
commodity prices quickly became its core business. Eastern and western
markets began to operate in tandem. In time, the development of an active
futures market, formalized by the Board of 1865, would be a source of griev-
ance for producers, who saw speculative traders deriving undeserved profits
from the products of their labour. Yet the futures market brought considerable
benefits to farmers and shippers alike. First, it helped reduce thefluctuations
between glut and scarcity, thereby stabilizing prices. Second, it increased the
availability of credit, since the standardization of grades regulated by boards of
trade gave certainty to contracts. Farmers and dealers had easy access to cash
Barons versus Bureaucrats