COMMODITIES: The Great Gamble

In the nation’s grain pits, the law of gravity seemed to have been repealed. This week, as prices still went up, December wheat futures at Chicago hit $3.07 and cash wheat soared to a 27-year high of $3.11. On the way, wheat dragged up the cost of many another food. President Truman last week had again tried to put all the blame on his favorite whipping boy: the grain speculators or gamblers, as he termed them (see NATIONAL AFFAIRS). The idea that the Government’s huge exports of wheat had caused the market’s rise was misinformation, said he. The U.S., he added, had always exported a third or more of its crop, and present purchases were not out of line.

This time the traders, who have been a little leary of talking back, bluntly said that Truman did not know what he was talking about. On the basis of the Government’s own figures, said Richard F. Uhlmann, first vice president of the Chicago Board of Trade, “our total [exports] were only 12% of the crop for the past 17 years.” This crop year, the Government plans to export 33% of the crop.

Moreover, Uhlmann added, in the past two weeks the U.S. Commodity Credit Corp. had bought up 40 million bushels of wheat, more than the total yearly exports in 1941-43. Snapped Uhlmann: “When, any Government buys more wheat in two weeks than is often shipped during the entire year, it’s bound to have its effect.”

The Fat Farmers. Grain speculation, as Secretary of Agriculture Clinton P. Anderson observed only a few hours after the President’s fluff, had already fallen off; trading had fallen 53% since the one-third cash margin rule was put into effect two weeks ago (TIME, Oct. 13). But the price of grain went right on rising. Next day, when rumors spread that CCC was about to step out of the market, the price of wheat fell off a bit, but continued its climb when the rumor proved false. So long as the Government bought, there was no reason for grain prices to go anywhere but up.

Up to last week the Government had bought about 270 million bushels of wheat, and that was slightly more than half of what it intends to ship during this crop year. Thus, in effect, as a prospective purchaser of further vast amounts, it was underwriting the speculation in the pit. It was also underwriting speculation by farmers. Convinced that Government purchases will drive prices still higher, the farmers are still holding back about half the current wheat crop. They can well afford to take the chance.

The parity law (TIME, Apr. 15, 1946) provides that if wheat falls to $1.89, the Government will start support-buying. If a farmer needs cash, the Government will lend him about $1.80 a bushel and impound his wheat in a federal granary. If the price rises, he can redeem the wheat and sell it at the increased price. Last week, a total of 20.5 million bushels, more than twice as much as last year, was impounded by such loss-proof gambling.

The Lean Years? Actually the biggest grain gambler of all was the U.S. Government. The U.S. had been able to make such huge shipments to Europe because of the enormous carryover from previous years’ bumper crops. But the emergency shipments have all but exhausted that carryover. From now on, the U.S. will have to depend on its current crops. The Government was gambling that the 1948 wheat crop would be1 as big as the bumper yields of the last seven fat years. But last week the sharp-eyed, hoarse-voiced grain traders were betting that the Government was wrong. This again nudged up prices.

In the wheat heartland of western Kansas, Texas and Oklahoma, the planting of winter wheat (normally about 75% of the wheat crop) was anywhere from three to si:: weeks late. The reason: drought. Last week, as a high wind blew, a dust haze filled the air in Kansas, and little sand dunes began to pile, around the fences. Good rains could still change the picture, but they had to come soon.