No law of the land, no trust-busting Federal attorney, can interfere when Nature conspires in restraint of trade. In Kansas, No. 1 winter wheat State, the past three months’ (September, October, November) “normal” rainfall expectation was 6.09 inches of rainfall; this year, actual rainfall was 1.75 inches. Nebraska, which expects 4.53 inches, got 1.15; Iowa, expecting 7.81 inches, got 2.82. Total U. S. water shortage reached 400,000,000,000 tons, left several States with their next-to-record drought, left Wisconsin with its smallest rainfall on record.
So the crop condition of winter wheat last week was 59.4% of normal, lowest on record, and a harvest of only 389,000,000 bushels is expected (down 43.3% from this year) and the price of wheat soared from 87!^ Nov. 28, past the haloed $1 mark to hit a high of $1.05, a 26-month high.
Any further drastic price rise is likely to be dampened by the 230,000,000 bushels carried over from the last crop year (of which approximately 175,000,000 bushels are in hock to the U. S. Government), but the chances of wheat staying around $1 were helped by news from Argentina that the wheat crop there was also in bad shape. Reason: late spring frosts. November in the Argentine is the equivalent of May in the U. S. Argentina’s expected harvest is around 160,000,000 bushels, less than half of last year’s crop.
¶ To the bankrupt Rock Island, Missouri Pacific, St. Louis-San Francisco, to the prosperous Union Pacific, Burlington, U. S. winter wheat adds up to a substantial portion of summer revenue. Largest of the winter wheat carriers is the Santa Fe. Wall Street Journal dug up some interesting figures on Santa Fe:
Wheat Tonnage Gross Revenue Net Income
1931 5,915,000 $ 181,181,000 $23,102,000
1938 3,724,000 $154,323,000 $ 8,228,000
¶ Neatest financial trick of the week was accomplished by Secretary of Agriculture Henry Wallace: By reducing the Government subsidy on cotton exports, he helped boost the price of cotton. He originally got a $36,000,000 fund with which to subsidize exports. He spent about $32,500,000, paying 1½¢a Ib. to subsidize exports of 4,344,434 bales. To conserve the balance of this fund, the subsidy was cut in half, midnight, Dec. 5. A few days later, it was cut to 2/5¢, again last week to 1/5¢. Anxious to share in the Government subsidy before it was all gone, exporters rushed into the market and bid cotton up 1¢ to 10.55¢, highest in two years.
Since July 27, the Department of Agriculture has made subsidy commitments on 5,700,000 bales against total exports of only 3,362,000 bales in the cotton year ended July 1, 1939. The balance of the subsidy fund should account for another 600,000 bales at $1 a bale. But if farmers, who have 3,941,950 bales in hock with the Government, start repossessing, they can flood the market all over again, break the price.
¶ Cotton goods prices paralleled raw cotton prices (up an average of
¶ a yard); when cotton is rising, textile fabricators like to buy for future use in hope of inventory profits. Last week’s cotton buying was paralleled by a rush to buy cotton grey goods: sales, 100,000,000 yards, up 80,000,000. This piling up of inventories is a gamble that retail sales will boom before production declines under inventory pressure. But there was an additional reason for textile activity: England, needing burlap for sandbags, has virtually cleaned out the Calcutta market since the outbreak of war with orders so far totaling 1,000,000,000 bags. The price of raw material for burlap is up from £18 ($84.24) a ton in August to £88 (about $344.96). Supplies for the U. S. are limited, not likely to last long. Textile companies are selling low-grade, rough cottons to replace burlap sacks.
¶ At the end of August, zinc sold at 4¾¢ a Ib. With war, its price rose to 6½¢ — a rise of 47% which precipitated no end of buying and production for inventory. Then sales began to dry up. Fortnight ago, American Smelting and Refining Co. dropped the price ½¢ ($10 a ton). Trade pundits guessed that the steel industry—one of the largest consumers of nonferrous metal—would let down production even further after January, and American Metal Market headlined: “The outlook for Metal Prices none too solid.”
¶ The November exports trade of the U. S. (reported last week) totaled $287,063,000, off $30,000,000 from October. Principal increase: aircraft, from $3,025,000 in October to $6,760,000. Other rises: meats and lard, iron & steel mill products, electrical machinery, automobiles, parts and accessories. Principal casualties: vegetables, food products, beverages, tobacco, textile fibres & manufactures, petroleum and petroleum products, chemicals. Striking was the fact that the war-waging United Kingdom, normally the best customer U. S. has, took delivery of only $31,026,000 of goods—$21,000,000 less than in October, $7,000,000 less than her average for the eight pre-war months. Deliveries on most orders placed since war had not yet begun in November.
¶ Most business and Government-guess-timators agree that in the first half, 1940 business will be down from fourth quarter 1939, but it appeared that one cushion which may pad the fall might be auto production. The fourth quarter of the calendar year is first quarter of the auto model year, a time when auto manufacturers justifiably overproduce in order to stock dealers. Overproduction of 200,000 cars would average less than five cars apiece for each of U. S.’s 41,698 dealers. Beginning of autumn, production ran at full blast. Last week it assembled 117,805 cars (against 102,905 last year). But Chrysler Corp., after its 54-day strike, has still to fill accumulated orders and stock its dealers. This may help sustain auto assemblies, regardless of January-April retail auto sales—and auto assemblies count 5.4% in the Federal Reserve production index.
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