system
Given the following post, respond as if you're commenting on Reddit:
human
How has the US ban on onion futures affected the onion market with respect to similar agricultural products?
gpt
The Onion Futures Act was put in place because Vincent Kosuga successfully cornered the entire onion market back in the 50s. By buying essentially every single onion in the region, he was able to jack up the price of onions and then slowly release the stock of onions while making gigantic profit. In fact he made even more profit by also shorting the onion market when the price collapsed... because he collapsed the price by selling his stock of onions. At one point a bag of onions was cheaper than than the bag the onions came in.

The ban was a direct and knee jerk reaction to this event. The biggest problem is that it creates volatility. Onions are usually planted in April and harvested in September. That means in September, you have a gigantic inventory of onions that you have to pay extensive storage costs on as you figure out how to get them to last till the next September. There's also significant lag between onions being sold and them actually reaching kitchens. So when prices go up, you see a flood of onions from the inventory, which depress prices, so farmers withhold inventory, and that cycle goes round and round.

Consequently, the best thing for farmers is to be able to pre-sell all their onions in September for each forward time period, maybe holding some back in case of excess demand. With futures, you can predict demand almost perfectly since there's a forward contract. But without a futures market, you're left trying to guess what the market demand for onions will be - which you might notice is not generally what onion farmers specialise in.

As such, onions today are one of the most volatile agricultural commodities in the US. Beaten only by India, where onion prices are even more volatile because of local demand and weather conditions.