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The Onion King of Pine Island

Original speech date: May 23, 2016

Project: Competent Communication #4 (How to Say It)

Cornering the market. That sounds like the plot out of a movie. In the James Bond movie Goldfinger, Goldfinger attempts to nuke Fort Knox to drive up the price of his gold. In Trading Places, starring Eddie Murphy and Dan Akroyd, the Duke brothers try to corner the concentrated orange juice market. But it's not just fiction—it's happened before. Back in the 1950s someone managed to corner the market, not with gold or orange juice, but with onions. I want to share with you the story of Vincent Kosuga, how he held the onion market hostage, and made a fortune doing it.

Vincent Kosuga was an onion farmer from Pine Island, NY. But just growing onions was not enough excitement, he was a gambler at heart. But he didn't make bets on card games or sports—he made bets on onions. He also spent time working as a trader at Chicago Mercantile Exchange. He knew that it was going to be onions that he could profit from by trading. In 1955 after a few years of trading onions, Kosuga decided to go all in. He was determined to corner the entire market. And so he began buying up onions around the country. He had buyers working for him in Michigan, Texas, and California—all across the U.S.—buying onions for him.

After buying up onions across the country, he began thinking about all those onions still in the ground. Couldn't he own those too? And this is where his experience as a trader came into play. He bought onion futures, too. By the fall of 1955, he had cornered the entire market, owning almost all of the onions in the United States, and not just the ones that were harvested but the ones in the ground too. He had 30 million pounds of onions shipped to Chicago and stored in warehouses.

That winter, Kosuga called a meeting in Chicago with onion distributors. He explained that things could go one of two ways: they could buy back their onions from him and he would maintain a large supply of the onions to keep the price inflated, or he could dump all of the onions on the market at once, destroying the market for not just this year, but the next. They agreed to buy 9 million pounds. But Kosuga had one last trick up his sleeve. He saw a way to have not just one payday, but two.

Over the next several months, Vince made bets that the price of onions would fall. In March, Kosuga flooded the market with every onion he had. The price fell through the floor. 6 months ago, a 50-pound bag of onions selling for $2.75 now sold for 10 cents. The burlap sack that the onions came in was worth 20 cents alone. The onions weren't even worth the bag they came in. No one had seen a price that low. You couldn't sell onions. You could not give them all away. People called orphanages, hospitals, schools, whoever would take them. The rest of them? The rest were dumped into the Chicago River.

Kosuga's bets paid off. He walked away with $8.5 million in 1956. That's $75 million today. But there were losers too. The distributors were left with millions of onions of worthless inventory that they had to pay to dispose. Many onion farmers went bankrupt because their onions were now worthless. The agricultural community was outraged by the sudden swings in onion prices, and that outrage led to investigations of Kosuga by Congress.

In the end, it was hard to pin down any crime that Kosuga had actually committed. His trader's license was suspended for 10 months. To prevent this from ever happening again, Congress signed the Onion Futures Act in 1958 banning the sale of onion futures. To this day, onions are the only commodity that you cannot buy futures in, all because of the Onion King.


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