Why Was the Chicago Board of Trade Established?


Quick Answer

The Chicago Board of Trade was established in the year 1848 by a group of businessmen. The goal of these men was to bring order to the grain market in the Midwest.

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Full Answer

During this time period farm prices were ruled by cycles of boom and bust. When the grain was scarce in the winter the price was high, according to Fundinguniverse.com. At harvest time, the Chicago area would be flooded with grain, and farmers had to accept very low prices. Some farmers would in turn keep the grain for fuel instead of wasting money on shipping it when the prices where so low. Other farmers found that they could not receive a fair price for wheat or corn and in many cases dumped it instead of paying to haul or store it. The Chicago Board of Trade offered the farmers a way to get a good price for their harvest ahead of time by offering 'to arrive' contracts or futures. Then, at planting time, a farmer could negotiate the price he would receive at harvest time. Larger buyers of grain benefited greatly by securing in advance a specific supply. The Chicago Board of Trade first consisted of 25 directors who gathered on Water Street above a feed store.

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