Between being successful at buying low and selling high — the essential formula for merchants of any kind — and having the ability to corner the market by buying up a large amount of the area’s onion supply, Kosuga, and his partner made it big and became rich. Their unprecedented success made them stars in the commodities market and beyond.
The relatively small storage house that Siegel owned at the outset of his business venture with Kosuga eventually gave way to huge warehouses. At one point in 1955 and into 1956, the warehouses stored over thirty million pounds of onions, which would take almost one thousand carloads to transport.
Using Bribery and Deceit to Succeed
Kosuga’s strategies to manipulate the onion market and increase profits came in different shapes and sizes. He once convinced a local weather service, most likely through bribery, to issue a frost warning on the region when there was no indication a cold front was coming. This warning, if real, would pose a great risk to onion crops, which inflated the price of onion futures contracts, thus making the owners of such contracts, like Kosuga, a pretty penny.
Clearly, thinking outside the box wasn’t the only way Kosuga rose to success: creating and maintaining relationships with the right people was also essential. He was known to shower associates with gifts and bonuses, even gifting his brokers expensive cars during a particularly successful business year.
Hoarding Large Amounts of Onions
Though Kosuga and Siegel’s business practices were sometimes quite creative, their main strategy was relatively straightforward: come to own a huge share of the onion market and then store the product in order to create a shortage in the market. Once this was done, they would begin selling their stock at a higher price, profiting from the shortage they had a central role in creating.
Helping their strategy was the fact that back then, just as today, onions were an essential food product all throughout the United States. Whether they were used raw in salads or cooked along with meats or to make sauces or condiments, these versatile vegetables were used constantly and in a variety of ways by citizens of all classes.
They Forced Onion Growers to Buy Their Onions
By the second half of 1955, millions of pounds of onions had to be shipped into Chicago to cover the purchases, both in onion produce as well as futures, made by Kosuga and Siegel. Owning such an outsized portion of the area’s onion inventory allowed them to essentially blackmail growers into buying their onions.
Kosuga and Siegel told growers that if they wanted to, they would flood the market with the huge number of onions they already had stored, which would cause the prices of the vegetable to go down precipitously. At the time, a bag containing 50 pounds of onions cost an average of $2.75, and the antics of the two merchants and businessmen threatened to affect that price significantly.
They Betrayed Onion Growers to Boost Their Own Profits
Most onion growers gave into the demands of Kosuga and his partner and began buying onions at the price they set to avoid the price decrease in the product that Kosuga had threatened. But as this was going on, the duo began to purchase short positions on a large amount of onion futures, which meant they were expecting the prices of that commodity to decrease.
Because many of their onions had begun to spoil — or perhaps because they intentionally wanted to create an image of onions flooding the market — Kosuga and Siegel began to ship their inventory out of Chicago so that the produce could be serviced and then reshipped back to the city.