Business: Peanuts & Pepper

“So this is the end.”

A pale, haggard man mumbled the words to himself as he slumped lower in his chair in a fourth-floor apartment of the swank colonnaded Taj Mahal Hotel in Bombay one day last week. India manager of the great London grain firm of Strauss & Co., he had just been ordered to close his office, stop all payments at once. Presently a messenger arrived with a cablegram. It was from his wife in England. “Try not to worry. Good luck and love.” Slowly the man dragged himself across the room to the window. . . . Later that day when they had removed his battered body from the street a letter was found in his apartment. “I cannot face the tangle,” it read. “Had they let me know a month ago I would have been fit enough to clear up their affairs.”

When news of the suicide of Henry Charles Whitehouse reached London, Strauss & Co.’s second largest stockholder collapsed in a sweat, was hospitalized with a nervous breakdown. Trading on the hoary old Baltic Mercantile & Shipping Exchange, biggest grain market in Europe, virtually halted while the managers posted a notice cancelling Strauss & Co.’s trading privileges. In Bombay, Bank of India and five other Indian banks started proceedings to collect the money which Manager Whitehouse had been ordered to stop paying. That day it was announced that Strauss & Co. had failed with losses estimated at £1,000,000. A receiver was hastily appointed to take charge of one of England’s biggest bankruptcies since lurid Promoter Clarence Charles Hatry went up in a puff of scandalous smoke five years ago (TIME, Oct. 21, 1929).

Not even the most cynical broker in Mincing Lane had reason to suspect the honesty of Strauss & Co. Its nominal head and biggest stockholder, old Edward Anthony Strauss, was educated at King’s College, is a member of Parliament from North Southwark. He inherited Strauss & Co. from his father, built it up into one of London’s five biggest commodity houses, doing an extensive business in castor seeds, linseeds, peanuts. Edward Anthony Strauss and his colleagues had simply made the mistake of going short of peanuts. Instead of the surplus they had anticipated, there was an acute decline in peanut shipments from India and alarming reports that the new crop was to be 30% under the previous year. The price of peanuts in London jumped 24% the first three weeks in January, was last week still 16% above the Jan. i level. The price of castor seeds and linseeds, in which the company was also short, had fluctuated violently. Soon the company found itself being slowly squeezed to death by a world-wide shortage of oils and fats which was aggravated when cottonseed oil output in the U. S. was cut by cotton acreage reduction, lard output by the corn-hog program, beef tallow by the Drought.

The crisis in peanuts, which virtually stopped trading on the Baltic Exchange for three days, soon provoked uneasiness in two other commodities which have lately become speculative favorites in London: white pepper and shellac. Gamblers who had bought orange shellac on margin at 122 shillings per cwt. during last year’s frantic speculation could not sell for more than seven shillings sixpence last week. Although financial editors declared that “certain weak positions have been taken over by strong hands,” Mincing Lane brokers remembered that the same thing had been said before the Strauss crash. White pepper traders were chilled by the Strauss failure because they, too, must pay up or go to the wall this week when settlement on 7,000 tons of pepper falls due. These 7,000 tons they had bought on paper in anticipation of a price rise. Instead of higher prices, they were given the sickening news that a shipment of 6,500 tons of pepper was on its way to choke the London market, bringing stocks on hand up to 20.000 tons against 1,950 last year.