Strange Events in History — Who Is the Onion King?

So we all kind of know that money is a thing we all made up so society could function a little easier, but then we let like 1% of the world own like… all of it so who’s to say? That’s depressing and not funny, and you’re here because you heard about a guy who once bought every single onion and broke the futures market. Which is objectively funny. But who exactly is the Onion King?

Farming and Futures

Our story starts with a guy named Vincent Kosuga and his 5,000 acre farm. He grew mostly onions, celery, and lettuce; his primary customers included the army and Campbell’s (the soup people). 

Kosuga was also into commodity trading, but he didn’t get his start with onions. He got his start trading wheat futures. It didn’t go well (he almost bankrupted his family), and his wife pleaded for him to go back to just farming. You might be wondering what a “wheat future” is, fair question because it’s one of those market things that, if you’re not involved in, you just go “stonks” and call it a day. 

At a basic level futures are an agreement you make with someone right now to buy something later—at a price you set now. It’s like us saying “alright, we’ll buy this apple from you for $5 in exactly six months.” Now obviously this is kind of whatever for a single apple. But when you’re dealing with larger transactions, you’re going to be pretty conscious of price changes. Well, it’s 2023 and you’re probably conscious of price changes because the price of basic necessities is skyrocketing faster than wages can keep up. 

Anyway, futures are used to speculate on prices, since if you think that apple from the previous example is going to be worth $10 in six months, buying it at $5 effectively means you’ve made a $5 profit. 

That’s the setup. A farmer almost bankrupts his family by getting into stocks. Better than most supervillain origins. 

Becoming the Onion King

Like every movie plot involving a protagonist and the stock market, Kosuga couldn’t stay away from trading. This time, he went from trading wheat futures to the legally distinct onion futures. This is important because 20% of the trades on the Chicago Mercantile Exchange were onion futures in 1955. 

Working with a guy named Sam Seigel in 1955, Kosuga bought a lot of onions and onion futures—enough that they had 98% of the onions in Chicago. This comes out to something like 30 million pounds. Kosuga and Seigel were able to do this mostly because they were already onion traders, and Kosuga already had experience manipulating the futures market.

With control over Chicago’s onion inventory, Kosuga and Seigel were able to threaten existing onion farmers under threat of flooding the onion market with their 30 million pounds of onions (doing this would tank the price of onions by sharply increasing demand, effectively making them worthless). Once those dominos were in place, the pair got short positions on onions in 1956. In price speculation terms, they anticipated the prices of onions would fall dramatically and set themselves up to profit if those prices fell. Except they weren’t really anticipating, since they controlled 98% of the onions. This is what hedge fund managers tried to do to GameStop in 2021, it didn’t work out for them GameStop shorters and they lost a lot of money while us cake-eaters laughed maniacally. 

Kosuga and Seigel then flooded the onion market, driving the price of a 50 pound bag from $2.75 to $0.10. This ended up causing onion shortages in other parts of the US, but Kosuga and Seigel made millions. This also drove a lot of onion farmers into bankruptcy, since their inventory was rendered worthless. Onions were so worthless that they were worth less than the bags they came in, and onions were just thrown away. Some were dumped into the Chicago River, making it the least appetizing soup ever. 

In response, the Onion Futures Act was quickly passed in 1958, effectively banning onions from being traded on the commodities exchange market. 

Speaking of onions, see if you know who produces them here.