In the US, onions are the only commodity that can not be traded as a futures contract due to 1958 Onion Futures Act. Why was this restriction not repealed along with other deregulation measures of 80s and 90s? Why was onion seen as different from other commodities?

PART I

Probably because there wasn't enough lobbying strength to overturn the ban their grandparents got put in place.

First, though, let's go back and walk through some of the history of futures trading and commodity pricing. The first time Congress tries to do something about a specific commodity future is with gold in June 1864. The background for that is that for large parts of the war, the gold to greenback (the paper currency issued by Secretary of the Treasury Salmon Chase) conversion ratio had served as a proxy for the perceived prospects of Union victory - call it a proto-futures market by investors.

The problem was that the value of greenbacks falling had very serious real world consequences, as it hobbled Chase's ability to issue more debt as investors began to demand immediately convertible gold backed debt instruments rather than promissory gold notes (which is essentially what the greenbacks were.) Chase was pretty much up against a wall; the government had expenses of roughly $70 million per month, but he was only able to sell about $10 million of bonds a month to offset this. Early June was when the Union army got slaughtered at Cold Harbor, at which point the greenback to gold ratio had risen to almost 2-1 (versus most of the war, where it bounces around 1.4-1). Chase had already tried one tactic over the previous couple months to get this ratio down by selling government gold into the speculative market to increase supply; the only thing this does is to briefly stop the decline and then accelerate it.

At that point, Chase is desperate. The Union Army is now stuck at Petersburg with no end in sight. Lincoln advises Chase to increase interest rates on bonds but otherwise is too busy to deal with finance (as he is for almost the entire war); Chase doesn't want to do so for a variety of reasons, including devaluing the massive amount of government paper that he's already got outstanding that would be in competition with the new instruments. Chase even thinks about trying to raise money in a foreign loan, except there's nobody willing to give him one. He goes to Senator John Sherman, chair of the Senate Finance committee, and asks him to shut down the speculative market by outlawing trading in gold futures. Congress goes along while rolling its eyes; one House member proposes a tongue-in-cheek amendment to not just suspend trade but also the laws of gravity. This passes on June 17th.

It is repealed less than two weeks later since it's obvious that if anything it's making things worse; people are still trading gold and greenbacks on the secondary market, and they fall further in trading to 2.3-1, or about $0.43 per gold dollar. Chase ends up resigning out of both frustration and Lincoln refusing an ally of his a patronage appointment; a little after that when Jubal Early attacks Fort Stevens on the outskirts of the Washington. Greenbacks eventually crash to 2.85-1, and if you wonder why there was such intense pressure after the war to keep the United States on the gold standard you can think of this ratio. If you bought greenbacks at the trough - as many speculators did - your only goal was to get them redeemed at parity for a roughly 300% gain regardless of the economic pain felt elsewhere while you do so.

But on Chase's last day in office, Congress finally does something more substantial on the finance front. The tariff is raised to a stifling 47 percent and the income tax is introduced; this and some creative short term debt allow the Union to get through the summer to the Fall of Atlanta, at which point Greenbacks rally back to 1.8-1, drop back a bit for the duration, and then eventually settle in back at 1.4-1 once Lee surrenders (there's still risk priced in for the possibility that the government may decide not to redeem the notes at a 1-1 ratio.)

That is the experience of Congress with the futures market in the Civil War, and I detail it because it's one reason (among many less savory ones) that it tends to be loath to do anything about it for the next 50 years. Commodity exchanges - Chicago eventually wins the fight, but major ones exist in St. Louis, New Orleans, Kansas City, and Minneapolis among other places - have trade volumes on them exceed farm production for the first time in 1872 and by 1900 end up rising to a remarkable 700% of what's actually grown. This coincides with the agricultural deflation that takes place during the last third of the 19th century; it is unsurprising that doing something about 'speculators' is one of the hallmarks of the populist movement that at its core is trying to get commodity prices up. Hundreds of bills are introduced to do something about this; only a single one, the 1893 Hatch/Washburn bill that would have levied a 10% tax on trades of commodities that someone doesn't own, passes Congress with some controversy - and after all that, it's done too late to have time to get the House and Senate versions reconciled and gets killed in a procedural vote despite one scholar arguing that something like 80% of Congress supported some form of regulation.

Commodity speculation gets so bad in the early 1900s - the most infamous being a battle between two very well financed speculators to corner the wheat market that implodes when farmers have a bumper crop the next summer - that it's the background for several books, countless news articles, and even a board game by Parker in 1909 called "Pit", where players try to corner the market in the commodity they're dealt (which still exists in modified form today.) But even at the peak of the Progressive Era, the impetus for reform stalls when commodity prices start rising, and by World War I farmers aren't particularly loud about the need as prices have shot up to three times that of pre-war levels. In fact, the only thing they complain about is that wheat pricing gets price controlled in 1917 and pulled off the exchanges until mid-1920 - meaning they miss out on an even bigger boom as unregulated off market wheat trades in 1918 take place at double that of even the elevated 1917 levels. (There is an argument that anger about this influences the 1918 elections in the Midwest.)

The post war recession changes that dramatically as prices tank, and Congress finally acts to begin regulating the commodities market with the Future Trading Act of 1921 in the belief that it would raise them back up. Even as commodity trading picks up in the speculative frenzy of the 1920s, prices go precisely nowhere against the ocean wave of increased worldwide supply; that deflation is one impetus for the disaster of the Smoot-Hawley tariff. As I've written recently, the collapse of agricultural prices leads to a massive amount of foreclosures, bank failures right and left, and the eventual passage of the Agricultural Adjustment Act. When the first version of the AAA is declared unconstitutional by the Four Horsemen, Congress steps in with the Commodity Exchange Act of 1936, which again does little for pricing overall. The government does, however, step in with price controls on other commodities, including butter.

This matters because eggs and butter had been one of the staples of off-season exchange trading that took place during the winter and spring. Most fruits and vegetables were immediately perishable, but apples, potatoes, and onions could be put in cold storage and last - hence why in 1942 the Chicago Merc introduces potato and onion trading to reflect what had been going on in warehouses for several years. This falls flat on its face a few months later when price controls are introduced throughout the economy on most goods, and seats on the CBOT fall to an all time low of $25 as there's now no need for any of its services; there is some question as to whether or not it will survive to the end of the war.