Old Hutch: The First Man to Corner the Wheat Market

Picture this. A 30-year-old guy from Massachusetts moves to Chicago with no connections and no fortune. Within a few decades, he becomes the most feared trader on the floor of the Chicago Board of Trade. They called him “Old Hutch.” And he figured out how to squeeze money from wheat like nobody had done before.

This is Chapter 4 of Torsten Dennin’s “From Tulips to Bitcoins,” and it is about the birth of commodity market manipulation in America.

Chicago Becomes the Center of Everything

In the mid-1800s, Chicago turned into the main hub for agricultural products in the United States. Wheat, corn, livestock. Everything from the Midwest flowed through Chicago.

In 1848, merchants founded the Chicago Board of Trade. CBOT for short. One of the oldest commodity futures exchanges in the world. In 1864, CBOT introduced the first standardized exchange-traded futures contracts. Before that, deals were messy and informal. Now there were real rules. Real contracts. Real money.

Into this new world walked Benjamin Peters Hutchinson.

The Man They Called Old Hutch

Hutchinson was born in Massachusetts in 1829. He moved to Chicago at about 30 and became a member of the Board of Trade. He learned how the wheat market worked from the inside. And he was a fast learner.

What Hutchinson understood better than anyone was simple. If you control enough of the physical supply of something, and you also hold futures contracts that force other people to deliver that something, you have them trapped. They have to buy from you at whatever price you name. This is called cornering the market. Hutchinson turned it into an art form.

The 1866 Corner

Hutchinson’s first big move came in 1866. He watched the weather and the crop reports. He bet that the wheat harvest would be poor that year. So between May and June, he quietly bought wheat on both the spot market and the futures market. His average price was about 88 cents per bushel.

Then he waited.

By August, the harvest numbers came in. Below average in Illinois. Below average in Iowa. Just like he predicted. On August 4th, wheat was trading around 90 to 92 cents. Not a huge move yet.

But here is where the squeeze happened. Short sellers, the people who had promised to deliver wheat at lower prices, started to realize something ugly. There was not enough wheat available for them to deliver. Hutchinson had bought most of it.

Panic set in. By August 18th, the price shot up to $1.87 per bushel. More than double what Hutchinson paid. The short sellers were crushed.

The CBOT was not happy. After this episode, they declared it illegal to corner the market by buying futures while preventing physical delivery. New rules. New regulations. Because of one guy from Massachusetts.

The 1888 Corner: Even Bigger

You would think getting burned once would make the exchange fix the problem for good. It did not.

Twenty-two years later, Old Hutch did it again.

In the spring of 1888, Hutchinson started buying wheat on the spot market and futures contracts for September delivery. He was methodical about it. Chicago’s total wheat storage capacity was around 15 million bushels. Hutchinson managed to control most of it.

Think about that for a second. One man controlled most of the wheat sitting in an entire city’s warehouses.

By September 22nd, wheat broke through the $1 per bushel level. Hutchinson’s average cost was below 90 cents. Already profitable, but he was not done.

He faced some serious opponents this time. John Cudahy, Edwin Pardridge, Nat Jones. These were powerful short sellers who had bet that wheat prices would go down. They were wrong.

Mother Nature made it worse for the shorts. An early frost destroyed local crops. European demand for American wheat grew. On September 27th, prices climbed to $1.05, then kept going to $1.28. The short squeeze was in full force. The shorts were trapped with no way out.

The day before the futures contracts expired, Hutchinson offered to settle at $1.50. But his final settlement price? Two dollars per bushel. His profit was roughly 1.5 million dollars. In 1888 money. That is a fortune.

The Part Nobody Likes to Talk About

Here is the twist that makes this story feel very real. Within three years, Hutchinson gave it all back. Every dollar. He lost his entire fortune.

Dennin does not go into the details of how, but the pattern is familiar. The same confidence that lets you corner a market is the same confidence that makes you think you can do it forever. Markets have a way of humbling everyone. Even the people who beat them twice.

From CBOT to Bitcoin Futures

The CBOT that Hutchinson dominated kept evolving. In 2007, it merged with the Chicago Mercantile Exchange to form the CME Group. Today CME Group is one of the largest derivatives exchanges in the world. And in December 2017, CME added bitcoin futures to its platform.

From wheat to bitcoin. The instruments change, the exchanges modernize, but the basic game stays the same. People buy, people sell, and sometimes one trader tries to control more of the supply than everyone else.

Old Hutch would have understood crypto futures perfectly. The rules are different. The technology is different. But the instinct to corner a market? That has not changed in 150 years.

Previous: Chapter 3: California Gold Rush

Next: Chapter 5: Rockefeller

This is part of my From Tulips to Bitcoins book retelling series. New posts every week.