Bava Metzia, Chapter 5, Mishnah 7. In this Mishnah, we return to the rabbinic prohibition of setting a price on produce - making futures contracts, where the seller receives immediate payment in exchange for future delivery of merchandise. The Sages prohibited this under normal circumstances, even though this is not a loan but merely a commercial transaction, and it is certainly not a Torah prohibition. The reason for this is that the transaction looks and feels like a loan, and it could even harm the seller in the same way that a loan with interest bites the borrower.
How so? The buyer pays the seller one hundred today, and the seller is supposed to supply him with ten gallons of oil in a month. Within that month, the price of the oil might rise, and when the seller supplies the ten gallons, their value will be two hundred. The buyer indeed profits, but the main issue is the seller: he took the money now and is supplying merchandise later, and this is similar to returning what he received with an addition - the transaction costs him dearly and he is the one who is hurt.
Therefore, the Sages said that since the matter looks like interest and feels like interest, it is rabbinically prohibited - unless one of two fundamental conditions is met, and our Mishnah deals with them.
The first condition - "he has it":
This condition is not stated so explicitly in the Mishnah. "He has it" means that the merchandise being sold is currently in the seller's inventory: ten gallons of oil are in his warehouse, and even though he will only supply them next month, they are in his possession right now. Because of this, when the buyer gives the hundred dollars, the Sages viewed it as if the seller handed over the oil to him immediately, and only postponed the actual delivery to a later date.
However, the buyer does not become the owner of the oil, since a formal act of acquisition, such as lifting the item or another act of acquisition, is required, and he did not do so. Moreover, although strictly speaking he is allowed to back out as long as no act of acquisition was performed, if he does so, he will be subject to the "Mi Shepara" penalty - a rabbinic curse stating that the same Holy One, blessed be He, who exacted retribution from the generation of the Flood and the generation of the Dispersion will exact retribution from someone who does not keep his word, who enters a transaction, pays his money, and then demands it back. Because of this, the transaction is considered quite finalized.
The main point is that the seller is covered: even if prices change to his detriment and the price of oil skyrockets, he will not suffer any real harm, since the merchandise is in the inventory in his possession.
The second condition - "a market price has emerged":
Our Mishnah teaches a novel concept that even when the seller is not in the status of "he has it," and the merchandise is not in his possession and ownership, it is enough that "a market price has emerged" - that there is a public, agreed-upon, and stable market price known to all, and the merchandise is available at that price. For example, the seller commits to supplying ten gallons of oil and has no oil at all, but everyone in the city sells that same oil at that same price, and he is able to obtain it at any time. Since the merchandise is easily available at a fixed price and the sale is conducted according to that price, the seller is covered, because he could have purchased it at this very moment. Therefore, it is considered as if "he has it," even though the merchandise is not actually in his inventory.
There are two qualifications to this law:
Someone who has one hundred gallons of oil in his warehouse is permitted to sell by setting a price for up to one hundred gallons only. Beyond this amount, he does not have the status of "he has it", and he is not permitted to do so.
The contract is established according to the accepted price of the day, and based on this, it is incumbent upon the seller to supply the merchandise. Even if prices change later on, and the one paying in advance - whose status is somewhat like a borrower - receives a higher value than what was agreed upon, such as the price of oil going up and his receiving oil worth two hundred dollars, there is nothing invalid about this and it is not called interest.
The text of the Mishnah:
"Ein poskin al hapeiros ad sheyeitzei hashaar" - it is forbidden to agree now on the future supply of merchandise at a predetermined price, as long as the merchandise is not in the seller's possession, until a public and approved market price is established that is known to all. Once the market price has been established, a person may commit to future supply based on the current market price, because "af al pi she'ein lazeh - yesh lazeh" - even though the merchandise is not in the seller's possession, it is available from others from whom he can purchase it in the market, making it as if he possesses it. He is therefore covered, and the Sages did not forbid this.
"Hayah hu techilah lakotzrim":
This refers to someone who was the first to harvest his field, and the pile of wheat is resting before him in the field. He still needs to thresh and winnow it before he can supply the grain, and a market price has not yet emerged, since he is the first and the wheat has not yet reached the market, so no one knows the set price. The Mishnah says: "Poseik imo al hagadish" - he is permitted to commit to the future supply of wheat kernels based on the pile resting in his field before threshing and winnowing. This has the status of "he has it," since the grain is in his possession, although not exactly in the form it is sold, but it is certainly in his possession in the field waiting for threshing and winnowing, and he can supply it with certainty.
And where is the line drawn? To this the Gemara answers: if the product lacks only one or two stages of labor to bring it to the state in which it is sold, it is permitted; and if it lacks more than two stages of labor, it is forbidden. Therefore, one selling wheat kernels is permitted to do so when only threshing and winnowing are lacking; but if the wheat is still growing in the field, harvesting is also required in addition to threshing and winnowing, and this stage is too early and one may not make an agreement on it.
From this come the rest of the examples in the Mishnah:
"Ve'al ha'avit shel anavim" - one selling wine who does not have wine in his possession, but rather grapes resting in a vat. The "avit" is a sort of trough where the grapes are kept so they soften and can be squeezed properly. Everything is ready, and it is merely a matter of squeezing, and therefore it is permitted.
"Ve'al hamaatan shel zeisim" - the "maatan" is the container where olives are placed to soften, before they are put into the olive press for squeezing and oil production. Even though the seller does not possess olive oil, the olives are in the vat, and this has the status of "he has it," since he is covered.
"Ve'al habeitzim shel yotzeir" - the buyer wants earthenware vessels, such as cups, made of clay shaped on a potter's wheel and fired in a kiln. The vessels themselves are not yet in the potter's possession, but he has "eggs" - small, egg-shaped balls of clay, which will become cups or pots. This is sufficient, and he is permitted to make a future contract on them, as these are standard vessels sold as a basic commodity based on the eggs currently in stock.
"Ve'al hasid misheshika'o bakivshan" - "sid" is the lime plaster used to smear walls. Its manufacturing process: limestone or chalk is taken and placed into a kiln, a sort of large oven, and there it is cooked - calcium carbonate turning into calcium oxide; afterward, it is mixed with water and slaked, yielding the plaster. Even though the ready plaster is not in stock, the limestone has already been sunken into the kiln in the ground, which will heat and cook it. This is sufficient for him to be considered covered, and he is permitted to finalize a contract for the supply of plaster, since the raw materials are only one or two steps away from the finished product.
Making an agreement on manure:
Here a slightly different matter is discussed: making an agreement on the supply of manure. How did they prepare manure? They would gather the animal dung throughout the year, and in the summer months, they kept it in a large pile. In the winter months, once the rains began, they would scatter it, and the combination of the rain with animals and people treading on the dung turned it into fertilizer.
Consequently, during the summer days, no one has manure available, and much labor is still required. Even so, the Mishnah holds that it is certain that over time there will be manure for sale, since the dung accumulates on its own from the animals on the farm. The question is therefore whether a person is permitted to make an agreement on the supply of manure in the summer, when it is not in his possession at all and is nowhere near a state of readiness. In this they disagreed:
Tanna Kamma: "Poseik imo al hazevel kol yemos hashanah" - even during the summer it is permitted to commit to the future supply of manure, since it is certain that it will be available. The transaction is essentially guaranteed, since the animals are standing there and it is just a matter of time.
Rabbi Yosi: There is no special rule for manure. "Ein poseik al hazevel ela im kein hayah lo zevel ba'ashpah" - the manure must be resting on the dungheap, and then it is certainly available, and it is just a matter of waiting until the conditions are right in the winter to scatter it and turn it from dung into manure.
Chachamim: They permit making an agreement on the supply of manure even when it is not on the dungheap, provided that it is at least winter; but in the summer, the time is too distant and there is no guarantee that it will be ready.
And the halachah follows the Tanna Kamma: as long as he has a farm and the animals are producing dung, it is merely a matter of time until they turn into manure, and therefore it is permitted.
"Ufoseik imo kasha'ar hagavoha":
The final section of the Mishnah introduces a new topic: May a person make a contract for future delivery and stipulate that he will receive the best price that will be available in the market? That is, the buyer wishes to purchase oil now, and oil is being sold at ten gallons for a hundred dollars. The market price has been established, and it is permissible to make a futures contract. But the buyer says: If the prices change in my favor, and for the same hundred dollars I can get twelve gallons instead of ten, I want you to commit right now to supply me according to the better rate.
The answer is that this is permitted. The reason: At any time, the buyer could say - I gave you a hundred dollars for ten gallons, and now I see that I can get twelve, so I want my money back. Even though this is improper and the curse of "Mi Shepara" would apply to him, ultimately it is within his power to do so. Since it is within his right, he is allowed to bypass this step and stipulate from the outset that if prices change, he will be given the better deal. This is the halachah, and it does not constitute ribis.
The language of the Mishnah is slightly complex and counterintuitive. We say that the buyer is allowed to stipulate that the contract be adjusted in his favor to secure the best price, meaning that the price drops - from ten dollars a gallon to eight. However, this can be described differently: The same hundred dollars will buy twelve gallons instead of ten, meaning the amount of oil that can be purchased for that sum has increased. This is how the Mishnah views things when it states "ufosek imo keshaar hagavoah" - the buyer is permitted to make a contract now that guarantees him to receive the best price; what we call the lowest price, the Mishnah calls the highest amount of supply, twelve gallons instead of ten.
"Rabbi Yehudah omer: af al pi shelo pasak imo keshaar hagavoah, yachol lomar ten li kazeh o ten li maosai" - Rabbi Yehudah says: Even if he did not fix a price with him according to the higher rate, he can say, give me like this or give me my money. According to Rabbi Yehudah, the buyer does not even need to stipulate this explicitly. For at any time, as long as he has not received the merchandise, he can say: I want my money back, since for those same hundred dollars I can purchase twelve gallons instead of ten, so why should I wait for your ten? And since it is in his power to do so, there is no need for a prior condition.
The Rabbanan disagree: He cannot truly do this, for if he does, the curse of "Mi Shepara" will apply to him. Rabbi Yehudah responds: This is true, but ultimately it is in his power to do so, and since it is in his power - that is what he intended from the outset. This is the core of the debate: When he said, "I am buying now at a fixed price and giving you a hundred dollars for ten gallons of oil," it is implied from his words that if the price changes in his favor, he will ask for the better price, and if not, he will demand his money back. However, the Tanna Kamma holds, and this is the halachah, that this is not the case: Someone who did not stipulate explicitly is not entitled to the better price, and if he tries to act in this manner - he will indeed get his money back, but he will face "Mi Shepara".
In summary: In this Mishnah we learned the parameters of the prohibition against fixing a price for produce and the two conditions that permit it - "yesh lo", that the merchandise is in the seller's possession, and "yatza hashaar", that the market price is fixed and known and the merchandise is available. We saw the law of "hayah hu techilah lakotzrim" - if he was the first of the reapers, and the limit of processing stages - lacking only one or two stages of labor; as well as the examples in the Mishnah: the pile of grapes, the vat of olives, the potter's balls of clay, and lime once it has been sunk in the kiln. We explored the Tannaitic dispute regarding fixing a price for manure, where the halachah follows the Tanna Kamma, as well as the law of "ufosek imo keshaar hagavoah" - he may fix a price with him according to the higher rate, and the dispute between Rabbi Yehudah and the Tanna Kamma regarding whether the buyer needs to stipulate this explicitly.