COMMODITIES: Law of Nature

“Self-preservation has oftentimes been referred to as the first law of nature, and we suppose it applies to traders as well as others.”

With these words, the U.S. Court of Appeals in Chicago last week wrote an end to one of the war’s most frantic commodity scrambles (TIME, Sept. 23, 1946). It cleared General Foods Corp. and Brokers Daniel F. Rice & Co. of charges that they had cornered the rye market. It also ruled out Department of Agriculture orders suspending them from trading.

The Department had based its case on the fact that General Foods had bought 2,000,000 bushels of rye which were about to be dumped on the market—though it and Rice already controlled almost 89% of deliverable rye. The court held, in effect, that this was no cornering move; General Foods was merely following the sound trading practice of protecting its heavy investment in rye against a price slump.

Corner or not, General Foods had owned enough rye to scare the daylights out of Minneapolis’ Cargill, Inc., the world’s biggest grain trader. Cargill had sold rye short and would have lost its shirt if it could not have bought grain to cover its contracts before the near corner drove the price skyhigh. The court shook its head over the slick trick Cargill, Inc. had used to import Canadian rye cheaply and break the market. Cargill apparently had been able to do so by crawling through a loophole in the law that permitted the import of rye free of duty, if it were sold for feed. (Cargill got the Bureau of Customs to give it one year’s time in which to show that this grain was used for feed.) This, said the court, gave Cargill an “unfair” advantage over other traders. But this, too, was self-preservation, and thus perfectly legal in the rye market.