San Francisco Onion Futures Company
onionfutures.com
onionfutures.com
https://en.wikipedia.org/wiki/Onion_Futures_Act
(which also banned box office receipt futures)
A fun thing is to go on FRED and make a graph with prices from onions and, say, corn to see the differences in volatility.
Tomato: https://fred.stlouisfed.org/series/WPU01130217 Onion: https://fred.stlouisfed.org/series/WPU01130216 Lettuce: https://fred.stlouisfed.org/series/WPU01130215
Compare with potatoes, which keep about as well an onions, and are farmed in the same areas. Look at onions and potatoes over a 5-year time span (because the default all-data time span is silly for this). It doesn't give enough control of the Y axis to make the comparison easy - for potatoes it shows me Y=40-320, for a range of 280; for onions it shows me Y=120-440, for a range of 320. This means that potatoes are more "zoomed in" and it's graph will exaggerate volatility relative to onions, but qualitatively, I'd say the potato graph looks smother just the same. This is exactly what economic theory says a futures market should do to the price.
The more durable a produce is, the easier it is to transport over a large area, which will always smoothen price fluctuations. This alone could explain why lettuce and tomatoes have higher volatility than onions, which have higher volatility than potatoes, which have higher volatility than corn and weat.
At least that's the null hypothesis that the hypothetical effect of futures should be compared to.
Like reducing the amount of water on the floor would be turning off the tap. Absorbing the amount of water on the floor is when you mop it up.
To reduce volatility you would need to actually stabilize the supply of onions.
What futures do is allow traders to shift risk from the future to the present. By pricing that risk, it's possible for people who depend on onions to pay a little more now in exchange for a guarantee about the future.
It's not magically going to make onions less volatile (although high risk prices can spur investment which might) but it can reduce disruptions caused by volatility.
The classic example of this is futures on jet fuel which allow airlines to weather random wars in the middle east, OPEC shenanigans, etc. Ticket prices are higher this way, but the existential threat of being forced to cancel a bunch of flights is gone.
If there is a supply shortage prices will rise; no amount of futures trading can create resources out of thin air.
And consumers neither lock in margins nor run a business because consumers buy at retail…
Ok charitably, maybe you use “consumer” in a special sense of businesses that consume raw materials such as owners of onion ring factories. In those cases, future prices (as opposed futures prices) are typically negotiated directly into contracts with producers of those commodities…and how many of those are in this thread?
In the vast majority of cases, futures are traded speculatively and physical delivery of goods and chattles is an extreme exception.
Traders are often happy to take the other side of that trade because they can trade against many counterparties, collect a small premium from each one, and try to ensure their counterparties won’t all fail in a correlated way.
Would you rather have net profits of 20, -10, 15, -5, -10, 25, -5 year over year, or profits of 4, 4, 4, 5, 4, 5, 5?
Your hung up on money, everyone is trying to explain that the exact same money is better when it is predictable versus erratic.
Yes, it is about the money.
And rarely is done by farmers.
I’ll keep paying though.
To the farmer, futures mean no risk of having to sell when prices are low. To the buyer, futures mean no risk of having to buy when prices are high.
The farmer also gives up the chance of selling when prices are high, and the buyer gives up the chance of buying when prices are low.
The transfers go both ways, which is the magic.
I suppose that prevents Kalshi gambling on box office duds?
>Is this legal?
>Yes, to the best of our knowledge. 7 U.S. Code § 13-1 prohibits "contract[s] for the sale of [...] onions for future delivery [...] on or subject to the rules of any board of trade in the United States." The San Francisco Onion Futures Company is not a board of trade, defined as an "organized exchange or other trading facility". We sell contracts privately to individual buyers, and do not operate any exchange or secondary market.
Performance art against that law?
Also November onions are an absolute steal compared to the adjacent months!
I hate to argue but then what would they define this as, if not an organized exchange or other trading facility?
> [A] trading facility that— (A) permits trading— (i) by or on behalf of a person that is not an eligible contract participant; or (ii) by persons other than on a principal-to-principal basis; or (B) has adopted (directly or through another nongovernmental entity) rules that— (i) govern the conduct of participants, other than rules that govern the submission of orders or execution of transactions on the trading facility; and (ii) include disciplinary sanctions other than the exclusion of participants from trading.
And 7 USC § 1a(51)(A) defines a "trading facility" as
> [A] person or group of persons that constitutes, maintains, or provides a physical or electronic facility or system in which multiple participants have the ability to execute or trade agreements, contracts, or transactions— (i) by accepting bids or offers made by other participants that are open to multiple participants in the facility or system; or (ii) through the interaction of multiple bids or multiple offers within a system with a pre-determined non-discretionary automated trade matching and execution algorithm.
(7 USC § 1a(51)(B) then follows with some exceptions to that definition.)
In short—an "organized exchange" is defined as a type of "trading facility". To count as a trading facility", whether of the "organized exchange" type or not, you must either accept bids or offers from other participants yourself or else deterministically match and execute those bids and offers.
The specific laws do not actually ban the transfer of those contracts (tbf this is very complex and depends on your reading). And yes they do not facilitate the trading of the instruments in the secondary market but they absolutely facilitate the instruments themselves otherwise there cannot be a secondary market without any backers of the instruments.
As distinguished from an exchange, where the exchange intermediates and becomes a middle party "simultaneously" to both sides.
The market dynamics are pretty different between broker dealers and exchanges. For instance a /ticker/ as a concept makes sense only with an exchange.
The exchanges basically pick up only the contracts or goods with the most volume and standardized & predictable goods.
To trade more exotic or niche things basically you have to find your own counterparty, versus the exchange acts as an "typical" buyer and seller to each side (assuming there is anyone there at all to participate on each side... giving rise to the concept of market makers who undertake to do just that, i.e., to be ready to trade either side at any time in a certain good).
https://www.npr.org/sections/money/2015/10/14/448718171/epis...
https://www.ams.usda.gov/mnreports/fvdidnop.pdf
Readers may wish to skip ahead to page 4, where onions are discussed.
Either way, I love it and I'm always excited to learn about what mundane functions the government and MS Office are keeping alive for society.
They have a website also: https://onionfutures.org
If you're going to do this with your life you have to believe that you're necessary - and you are - everyone wants to drive their fancy cars and their big fucking houses they can't afford they need you - you're necessary.
The only reason any of this works is (you) have (your) hand on the scale in their favor. (You) take it away, everything gets really fucking fair, really fucking fast - and don't no one want that.
They want all of the things (you) have to give them and .... then they want to pretend they don't know where it came from.
I thought maybe they're some sort of special exotic onion variety, but I don't see anything to suggest that.
(It's primarily a novelty/art thing. But I do actually deliver the onions.)
How do you decide upon a price?
They also got onion farmers to buy back onions they'd already sold.
That paid off in a concentrated lock on the bulk of rare earth applications.
Well, you'd think, but squeezing the CTD bond was completely accepted practice well into the noughties until PIMCO flew too close to the sun and faced regulatory wrath.
We don’t complain about switch cases in code when there is two or three switches we start refactoring once it starts to proliferate.
The law is no different , passing a wider ban would not get the votes easily or quickly and the interested parties the onion industry have no reason to push for it neither does the lawmaker acting on their interests.
If said small markets also had exceptions passed seeing the onion one there could have been case to be broad.
It would premature optimization to otherwise, based on just need for elegance , code or law has to work first even if dirty .
And therefore, yes, it was a silly, political reaction.
The answer is it is difficult to say. One thing anyone cornering the market has to consider is government intervention. In this respect onions are perfect. They are merely a condiment. Nobody is going to starve for lack of onions if the rest of the food supply is intact. Thus any government official rushing in to intervene in a cornering of the onion market will look a little foolish and thus think twice about it.
If someone tried to corner the wheat market the government is likely to step in, confiscate his goods and pay him a fair price for his wheat which will be much lower than the cornered price. The cornerer will then lose money.
I suspect the congressman that passed the legislation did his research and talked to all potentially affected parties. I suspect the farmers and ranchers producing the other traded commodities said that this was not really a concern for them and that they would prefer that their commodities continue to be traded.
Shall we address the general question of privacy, or just close the particular breach that affected a congressman? You know it's going to be the latter.
It is a lot harder to corner the market when you have very non-perishable or very perishable goods and/or much larger domestic and global markets with harvests that vary across geography and time, like wheat and frozen orange juice concentrate. Most goods traded via futures have those properties. Onions is right on the edge of even making sense as a futures commodity, and because of that, it's a recipe for manipulation.
And there were calls to regulate potatoes the same way in the fallout of the onion market manipulation, but those didn't pass, and in 1976 the potato market was almost cornered in the same way.
But sure, govment bad.
As I wrote in a previous comment on this thread I am sure the congressman that passed the law discussed the issue with farmers and ranchers producing all traded commodities and the ones that were not growing onions did not think there was a significant risk of a corner and they preferred to have their goods traded.
Although I do agree with you that privacy protections should be broader. As far as Megan’s law I am sure you realize that it is intended to protect everyone from sex criminals not just people named Megan.
Legislative product management, by committee.
A direct democracy might have just banned all futures.
I bought a box of onions from him before and they were very good. I ate those onions for a long time.
Some personal preference not covered in that recipe: do not caramelise all your onion; instead, keep a quarter and add it in after you have caramelised the rest. This gives a bit more variety in terms of taste and texture.
Few things warm your cockles this satisfyingly on a wet, dreary late-Autumn evening.
https://www.emerils.com/127311/seven-onion-soup-parmesan-gar...
I am serious, reply here, I'll sell you my onion contract for $4.50. Who's buying?
1: have a QR code to 'claim' a key (eg, so I can print the future out onto a card and hand it to someone) and
2: have the QR code allow me to claim multiple keys at once (eg, to allow me to sell multiple onions in one QR coded 'bag' of keys).
Getting some ideas on how to sell some onions locally. Maybe even an onion kiosk. Put cash in, get onions later. Or an arbitraged webfront to sell the onions via.
How many times have you failed delivery where you have been able to establish contact with contract owner and they want their onions? Curious
Why don't existing futures cover this? Are onions unique in how sturdy they are? You can use derivatives of the weather itself even.
The sulfur content also affects the onion quality and price: “sweet” onion has low sulfur content, “sour” onion has high. Sweet onion can be used much more easily than sour onion, which requires more culinary processing to extract the sulfur compounds that make you smelly and your eyes water.
Onion has been shown to have a negative impact on climate, especially on air quality with people in confined spaces after lunch, but despite this it continues to be a valuable resource that is processed into many everyday foodstuffs: white, yellow, red, salad, and for specialist applications the highly refined shallot and pearl compounds as well.
Alas it seems likely that geopolitical upheaval will mean onion trading at ever higher prices. Brest Roscoff Intermediate (light, sweet onion) is trading over $8 a bunch (yes, crude onion is traded in weird units!) since the war began.
There’s also a bright future for synthetic. environmentally friendlier onion! Hydroponically grown scallions — so called “green” onion — have some interesting applications in the aerospace industry e.g. in-flight sandwiches and salads.
Tsk. There is no free market.
www.onions.com
How is this article HN newsworthy?
From what I get from it, it describes a complex technical + social system that has been exploited to the max leading to insane pricing, risks and a ban. They want to do that again it seems.
That this specific algorithm isn’t revealed is the joke: it’s a complete fraud, their secret uber elite algorithm will favor nobody except the owners obviously.
It’s super nerdy and it took some effort, at least for me, to understand the fun.
I might have completely missed the mark as everything about this subject, such as the Wikipedia article and so on are completely new to me.