On Monday, a group of students from the University of Chicago stood outside the Chicago Mercantile Exchange—one of the world's largest and most diverse derivatives marketplaces—and called for the repeal of an obscure 1958 law that bans onions as futures products traded on U.S. exchanges.
Attracting an audience with a humorous jingle and amusing signs that included "Onions Deserve a Future," "Honk If You Want Free Onions," "Hot Girls Hedge Onions," and "Free Markets Feed Families," the student group, named For Our Futures, has a simple platform: a repeal of the 1958 Onion Futures Act, which prohibits anyone from trading in onion futures on commodity exchanges. (The law was amended in 2010 to ban motion picture box office receipts from being traded on commodity exchanges.) The viral campaign drew enough attention that Mike Selig—chairman of the Commodity Futures Trading Commission and a proponent of expanding the list of commodities traded on futures markets—was asked about the law in a media appearance.
American farmers produce about 6.75 billion pounds of onions a year, according to the National Onion Association, an industry trade group. While peers who grow cotton, wheat, corn, and soybeans can hedge against price swings by trading futures contracts, onion farmers have no such recourse under federal law. But, as the Agriculture Department's daily National Potato and Onion Report shows, onion prices are highly volatile and subject to wild swings, making them an ideal market for futures trading.
In its latest report, released Monday, the agency shows that onion prices have roughly doubled since this time last year. If onion futures contracts were legal, farmers could rely on market expectations instead of planting crops based on last year's prices. It would also let buyers potentially cut costs by locking in lower prices to protect against spikes. Trading onion futures contracts would give the industry a useful price-discovery tool, one that the student group aptly notes is "crucial for price stability and for hedging risks associated with weather and market fluctuations."
It's not For Our Futures' first time trying this gambit. The student group staged similar protests at college campuses in April and May, armed with bags of raw onions to entice passersby into signing their petition to legalize onion futures. The students' crusade might be comical, but after a recent Gallup poll found that 57 percent of Americans age 18–34 have a positive image of socialism, it's encouraging to see college-age students stand up for free markets.
A protest over onions sounds absurd, but it's a viral reminder to others in that age cohort of how far governments can go when given the slightest leeway to regulate an industry.
Instead of relying on outdated price points when planning future harvests, American onion producers could use resources like futures contracts that offer real-time market signals. All that would require—as the college kids state—is for federal lawmakers to "let the free market reign supreme."
The post You Can Trade Contracts on Elections, but Not on Onions. These College Students Want To Fix That. appeared first on Reason Magazine.