In 2020, approximately 134,700 acres of onions were harvested in the United States. That is about 75.2 million pounds sold for a value of $877.8 million in the US alone. But have you heard of Vince Kosuga’s shrewd business plan that involved 80 million pounds of onions?
Vince Kosuga, a farmer and trader, controlled the onion prices of the nation’s market in the 50s. He accumulated almost 30 million pounds of onions nationwide and controlled its supply. This eventually led to the Onion Futures Act.
The Great Onion Corner
Vince Kosuga was a New York farmer born on January 15, 1915. He owned a large farm in Pine Island, where he grew celery, lettuce, and onions. Kosuga was also a greedy businessman who saw an opportunity in monopolizing the soybean and wheat futures market in the 1930s. Unfortunately, Kosuga was struck by a lousy wheat market at the time.
Kosuga felt there was a more significant opportunity in one of the crops he knew best, onions. By 1955, Kosuga was stockpiling his onion produce on his farm. He then discreetly started purchasing and storing onions across the US with the help of a few partners while buying futures contracts on the onions planted.
By the fall of 1955, Kosuga essentially owned all of the supply of onions in the country, both already harvested and those still growing. He also controlled the loans of all the onions. He and his partners created a false shortage of onions in the market. They then demanded higher prices for their onions from distributors and buyers.
If they disagreed, Kosuga and his partners would destroy the market and make onion prices drop. Kosuga was able to earn a massive profit from buying onions at a lower cost and charging higher fees. Kosuga then bet that the onion prices would crash due to the supply.
Kosuga then proceeded to take the remainder of his supply of onions to the Chicago Board of Trade and flooded the market and the streets with it. Due to the increase in supply, the prices crashed, leaving other onion farmers with their products that now were worthless.
The onions were consequently dumped in the Chicago River, and Kosuga made millions of dollars he enjoyed until he passed away in 2001. It was also reported that several onion farmers lost all of that they had in his scheme, and some of them committed suicide. (Source: Farm Progress)
The Onion Futures Act
With Kosuga’s exploitation of the onion market, the government responded on August 28, 1958, passing the Onion Futures Act. The law effectively banned the trading of futures contracts on onions. (Source: DBPedia)
The law is the first and only law, as of 2010, to ban the trading of futures contracts for a specific commodity. Violation of this law is considered a misdemeanor and is punishable by a fine of up to $5,000.
The law effectively severely impacted onion farmers. Without a futures market for their produce, farmers have a more challenging time planning out their crops, and onions cost a bit more for consumers. (Source: CEI)