On the Chicago Mercantile Exchange, the giddy fluctuations in onion prices seemed very suspicious to the Commodity Exchange Authority. Beginning at $2.75 per 50-lb. bag last August, the price skidded t010¢ by mid-March. Last week the Commodity Exchange Authority formally charged that it had sniffed out—as it suspected—a price manipulation plot.
CEA said that the market-rigging had been directed by a New York onion grower, Vincent W. Kosuga, and a Chicago produce distributor, Sam S. Siegel, in a deal with 13 onion growers. But partway through, said CEA, the city slickers seemed to have doublecrossed the growers, who lost heavily.
Last autumn, charged CEA, Kosuga and Siegel bought 928 carloads of onions, which were shipped to Chicago and stored. This constituted 98% of the onion stocks available in Chicago for onion futures delivery. They then asked 13 of the growers to buy onions, threatening to dump their onion holdings on the market and force down prices if the growers refused. The growers accordingly bought 285 carloads for which they paid $168,000. In return, Kosuga and Siegel promised to hold their onion stocks off the market until March 1956, thus supporting the long side of the market.
But the growers were tricked shortly afterwards, when Kosuga and Siegel switched to a short position in the market, CEA charged. In February they held short positions for 1,148 car lots, and the price was down to $1.02 a bag. They were engaging in "a conspiracy to depress the prices in order to cover their short position," in the March onion futures. To grease the price skids, they allegedly shipped some of their aging onions out of Chicago, had them culled, resorted and repacked, and then sent back to Chicago #151;to make it appear as though large quantities of new onions were pouring into town. As the price fell, the growers were stuck with small mountains of high-priced onions.
Kosuga and Siegel are scheduled to give their rebuttal at a hearing in Chicago next month. Meantime, the onion growers' cries of pain have been so loud that a House Agriculture Subcommittee is also holding hearings—on a measure to ban onion futures trading on the Chicago Mercantile Exchange.