Corn in the Past – history of corn trading
Native Americans grew and consumed corn thousands of years before citizens in the rest of the world new of its existence. Christopher Columbus sailed across the Atlantic, traded with the Natives of the West Indies, and brought corn back to Spain. This marked the introduction of corn to Western Europe and eventually the rest of the world. Columbus is remembered in history as the man who discovered the Americas. Rarely is he mentioned as the first man to conduct an overseas trade of corn in a world where the notion of a commodity contract, as it is known today, didn’t yet exist.
More notable trade of corn began as Europeans avoiding religious persecution traveled West across the Atlantic. Although it’s impossible to say, many historians believe that the settlers would not have been successful if the Native Americans had not taught them the benefits of cultivating corn. Little did they know that corn cultivation would turn out to be the foundation for a major economic force in the form of the largest cash crop in the United States.
As corn and other grain production grew in size and volume, proper commodity exchanges became a growing necessity. In order to fulfill that destiny, the Chicago Board of Trade (CBOT) was founded by 83 merchants. The CBOT was the first of what would be many commodity exchanges focused on futures commodity contracts. The idea was to allow proper price discovery while giving a market for producers and consumers to trade their crop. Chicago was the natural selection because of its location. The “Windy City” lay right in the heart of the Corn Belt. The Corn Belt, consisting of Iowa, Illinois, Nebraska, Minnesota, and Indiana, which is the largest corn producing region in the United States. Chicago is also located on Lake Michigan. Having access to the Great Lakes allowed for the more efficient transportation of agricultural commodities.
The corn forward contract was the first futures commodity contract in the United States. In 1851, the CBOT introduced the corn futures contract for 3,000 bushels. Futures contracts became more popular among both buyers and sellers. It allowed for farmers to hedge production and commercial users to hedge costs. In 1865, the CBOT standardized a formal futures contract and margin is introduced.
A lot has changed since corn was first traded at the CBOT in the mid 1800’s. Electronic trading was introduced in the 90s and in 1998 the side-by-side trading that you’re familiar with came to be. Electronic trading has given individuals and entities around the world the ability to buy, sell and speculate on the corn market. The advancement of trading and commodity exchanges has played a pivotal part in the international markets for corn.
Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results
