Remember that scene in the movie Trading Places where Eddie Murphy and Dan Aykroyd bankrupted
those two old rich guys by cornering the frozen orange juice market?
It turns out that a guy actually once did make many millions of dollars by doing pretty
much exactly as they did in the movie, only instead of orange juice, he bought onions...
millions upon millions of onions.
Besides getting filthy rich in his clever little scheme, he inspired the Onion Futures
Act, which banned selling onion futures in the United States.
We can’t make this stuff up…
Prior to his stint on the commodities market as the king of onions, Vincent Kosuga was
an unimposing, 5 ft 4 inch tall onion farmer who had turned an unwanted 5000 acre patch
of dirt into a veritable onion-filled garden of Eden.
However, just making money growing onions apparently wasn't enough excitement for Kosuga
and in the early 1950s he turned his attention to trading onion futures through the Chicago
Mercantile Exchange, colloquially known as the MERC.
Before we get too far ahead of ourselves, we should note that a few years prior to this,
Kosuga had tried to trade wheat futures on the commodities market and screwed up so badly
that he brought his family to the brink of bankruptcy.
Kosuga's wife made him promise never to trade again after his failed trades resulted in
them having to borrow money from a family friend just to stay afloat.
Ignoring the pleas of his wife, Kosuga soon went back to trading, only this time instead
of trading wheat, he stuck to what he knew and began trading onions.
If you're curious about why onions were such a lucrative market, that has a lot to do with
the "limited storability of onions" which are typically planted and harvested at very
specific times during the year, which meant that for traders the price of onions had the
potential to fluctuate wildly on a near day to day basis.
For example, when the onions were harvested, they typically commanded a high price due
to the fact the market had been virtually devoid of them for many months and remaining
stores of the previous crop were rapidly spoiling; however, this inevitably led to many farmers
flooding the market with their harvest at the same time in a desperate attempt to get
the best price, in turn dramatically lowering the price.
The market for onions was so potentially lucrative that at one point in time, about 20% of all
the trading that occurred in the MERC involved onions.
As an onion farmer himself, Kosuga held a considerable advantage over the other traders
and he very quickly became a rich man buying and selling onion futures.
(For those not familiar a "future" is "A financial contract obligating the buyer to purchase
an asset (or the seller to sell an asset)... at a predetermined future date and price.")
In other words, Kosuga was buying onion futures in the hopes that the price would go up when
that date arrived so that he could sell them for a profit.
To help facilitate this, Kisuga wasn't averse to shady dealings to turn a profit.
For example, one year, knowing that his own crop was coming along nicely, Kosuga surmised
that the rest of the market would follow suit and hence when the time to sell came, the
market would be full of onions and the price would drop too much.
So, in an incredibly sneaky and probably illegal move, Kosuga bribed an official at the Chicago
weather office to issue a severe frost warning (which would lead to many onion crops failing).
There was no such frost coming, but when this news leaked, people began panic-buying onions,
driving up the price and thus making Kosuga his money.
As shady as that move was, it doesn't even come close to what Kosuga did in 1955 when
he teamed up with his friend Sam Siegel.
Siegel owned a cold storage facility which he used to store, amongst other things, onions.
Between the two men, they effectively had the financial and physical capability to buy
and store almost every onion in Chicago, so that's exactly what they did.
In the Autumn of 1955, after almost a year of frantic buying, Siegel and Kosuga owned
98% of the onions in Chicago (about 30 million pounds worth).
With literally the entire supply of onions under their control, the men were then able
to artificially inflate the price of onions to about $2.75 a sack by severely restricting
the supply.
After they'd inflated the price of onions, the men then enacted the most sinister and
brilliant part of their scheme- they began short selling onion futures, which essentially
meant they were selling onions in the hope that the price would fall, allowing them to
buy them back for a fraction of the cost, making potentially a huge profit in the process,
so long as the price fell.
Because the men owned just about every onion in the city, they could guarantee that the
price of onions would fall simply by flooding the market with the millions of onions they
were holding in reserve as soon as the sales were final.
By March of 1956, the price of onions fell so much that they effectively became worthless
(from $2.75 cents per 50 lb bag to 10 cents in the span of just 6 months)- the onions
were now worth less than the sacks they were being sold in.
Dozens of onion farmers were experiencing a new way onions can make your eyes water
as they went bankrupt and millions of rotting and worthless onions ended up being dumped
across the city.
As for Kosuga and Siegel, they got away completely scot-free because they'd technically not committed
a crime.
As a direct result of Kosuga's actions though, the U.S. government enacted the Onion Futures
Act in 1958, making it illegal to trade onion futures.
Perhaps the most curious part of all of this is that Vincent Kosuga was by all accounts
a nice guy when he wasn't ruining people on the onion market.
For example, he was a hugely respected and loved philanthropist almost his entire life,
and the lion's share of the money he earned trading actually went straight to some charity
or other.
He was also well known for showering friends and family in lavish gifts.
Kosuga was also a very devout Catholic and he donated so much money to help fund the
church's charitable activities that he was given a private audience with three different
Popes.
To top it all off, Kosuga was so loved by his community that Pine Island (the place
he called his home) voted him their citizen of the year in 1987.
If you're wondering, after Kosuga made his vast fortune, rather than retiring to a tropical
island, he opened up a restaurant called "The Jolly Onion Inn" where he worked as a chef.
Bonus Fact: Ever wonder why onions make your eyes water?
Well, wonder no more: Onions, along with many other plants in the Allium species (garlic
is another popular one), absorb sulfur from the soil.
When onions are chopped, it ends up breaking cells within the onion, which releases certain
enzymes.
These enzymes then react with the sulfur, creating amino acid sulfoxides.
These, in turn, create the highly unstable syn-propanethial-S-oxide, which is a combination
of sulfuric acid, sulfur dioxide, and hydrogen sulfide.
When this substance, in a gaseous state, comes in contact with the moisture in your eye,
it triggers a burning sensation via the ciliary nerve.
Tears in the eyes are regulated by the lachrymal gland, which is situated just above your eyelids.
When the brain gets a message that there is an irritant in the eye, such as the above
syn-propanethial-S-oxide, which gives a burning sensation, it then kicks the lachrymal glands
into overdrive, trying to flush the irritant out of your eye(s) with tears.
Cooked onions won't produce this same effect because the process of cooking the onion inactivates
the enzymes needed to make the syn-propanethial-S-oxide.
So you can safely chew the cooked onions without getting teary-eyed.