Too Much Wheat

Last week U. S. granaries grew greater and greater with stored wheat. U. S. wheat markets went through heavy liquidation. U. S. wheat dropped below 95-c- per bushel, lowest price since 1923, and as low as the lowest low since the War. In recent years dollar wheat has been an ebbtide mark, a symptom of a demoralized market, a text for sermons on overproduction and the farmer. But last week dollar wheat would have been good news: 90-c- wheat seemed to be the new low level for which crop prices were heading.

Simple enough was the explanation--"too much wheat." About 350 million bushels have been carried over from last year's harvest. The winter wheat crop has begun to come in, is estimated from 625 to 650 million bushels.

Yet, gloomy though the situation appeared at the close of last week, the market opened this week not with a further decline but with a frenzied rally. Wild was the excitement in Chicago's wheat pit. Opening prices showed variations of five points at different parts of the floor. Trapped shorts, feverishly covering, were shooting prices up at the rate of a cent between trades. At the close of the day, the market had staged a $300,000,000 advance, registered net gains of some 5 1/2 to 5 7/8 points. In one day almost one-third of the three months' decline was made up, and wheat was back over a dollar again.

Chief factor in the sudden change was information from Washington that the Government would apply $100,000,000 of its revolving fund to help out the wheat market. As wheat closed last week at 98, and as it costs about $1.23 to raise a bushel, it was difficult to see how much lasting good $100,000,000 would do in an 880 million bushel crop. Traders, however, did not pause to work out the economics of the situation. The fact that help was coming was sufficient. Furthermore, the market had been oversold, and prices forced below their natural level were ready to rebound violently at the first good news.

The wheat recovery was accompanied by rises in corn, oats and rye. It also aided the Manhattan stock market, which opened strong in a day of light trading. As far as permanent relief of the wheat situation was concerned, however, it was felt that only a major crop scare in spring wheat would result in continued rising prices. It has been estimated that there will be a world carry-over of 500 million bushels on July 1.