A 68-year-old debate over the federal ban on onion futures trading has resurfaced, this time prompted by students at the University of Chicago who are questioning whether the 1958 law should remain in place.
Congress banned futures trading in onions following market manipulation and speculation that caused significant financial harm to onion growers and disrupted the industry. The law was enacted for good reason, and the National Onion Association (NOA) sees no reason to reverse it today.
NOA statement on onion futures ban:
“The National Onion Association continues to support the ban on onion futures trading.
We appreciate the students’ interest in onions and their enthusiasm for civic engagement. But America’s onion growers fought hard to secure this protection, and the NOA sees no reason to reverse it.
While the students are calling to “democratize onions,” growers used the democratic process to make their voices heard in Congress. The ban followed years of advocacy by farmers who had experienced the consequences of market manipulation firsthand.
Trading on onion futures began in 1942. During those years of trading, NOA records stated that onion producers, “having no recourse or control, suffered almost constant ill effects from futures trading, which was forced upon them without their consent or approval.”
The 1955-56 onion season illustrates this point. Traders Vincent Kosuga and Sam Siegel accumulated enormous holdings of onions and onion futures, giving them control over much of Chicago’s available supply. They pressured growers to purchase their inventory by threatening to flood the market, while promising to hold back their remaining stocks to support prices.
They then took substantial short positions, which allowed them to profit as prices fell, and flooded the market with onions. The resulting price collapse left growers holding crops worth little or nothing. Some faced the added expense of disposing of onions they could no longer sell.
For growers, this was more than an unusual chapter in financial history. It threatened their farms, their livelihoods and the value of an entire season’s work.
Onion growers across the country responded by taking their concerns to Washington, some of them traveling to D.C. weekly. After a sustained, three-year legislative effort, Congress passed the Onion Futures Act, which President Dwight D. Eisenhower signed into law in 1958.
In 1956, then NOA President Veril Baldwin said the industry “is firmly convinced that onions are too perishable, too short in season, too vulnerable for manipulation, too small an industry to lend itself to futures trading.”
We respect the students’ right to advocate for a change, but the NOA continues to believe those growers are better served by keeping the ban in place.
Growers fought for this protection, and we continue to stand behind it. The students identify legitimate functions of futures markets, but the benefits they describe are possibilities—not guarantees that reopening onion futures trading would serve growers.”
