Soviet Shorts

Last week Secretary of Agriculture Arthur Mastick Hyde thought he had found a sinister explanation of declining U. S. wheat market prices. In a voice loud enough to be heard in the principal wheat-growing states (where low farm prices are likely to be a political issue in this year's campaign) he charged the Soviet Union with selling wheat short on the Chicago Board of Trade-to depress the price, to increase farm unrest. Secretary Hyde insisted that the Soviet short-sellers could never cover their future contracts by actual delivery of Russian grain over the 42-c--per-bu. U. S. tariff.*

These fresh politico-economic accusa- tions against Russia quickly stirred up a great commotion from which these facts emerged:

The All-Russian Textile Syndicate, a Soviet trade agency in the U. S., received orders from a "client" (presumably the Russian Government) to sell wheat futures in Chicago. The amount: 5,000,000 to 7,500,000 bu. According to E. W. Belitzky, the Syndicate's vice president and treasurer, these sales were hedges-- that is, the "client" held the wheat and contracted for its future sale as a form of price insurance./- Recent declines gave the "client" a $200,000 paper profit on his sales over the spot price.

Secretary Hyde opened his offensive by a telegram to President John A. Bunnell of the Chicago Board of Trade, demanding action by the Board to protect U. S. husbandmen from alleged Soviet price manipulation. Mr. Bunnell replied by asking for specific charges and proofs. Secretary Hyde, annoyed at the skepticism that greeted his accusation, started for Chicago to press his case against Russia in person. Before he left, he declared:

"We are affording the Chicago Board of Trade an opportunity to clear the decks by its own voluntary action. If it doesn't, that will be another chapter. . . . During four days [Sept. 8, 9, 10, 11] the market on May wheat dropped 5-c-. The sales by Soviet Russia were probably not responsible for all of this drop, but such sales, added to other bear factors, contributed greatly to a bear psychology which depressed the market. ... So far from having wheat to sell and thus to hedge, the Russian Government is rationing its people."

In the meantime Mr. Belitzky had this to say of his wheat operations: "The sale of a small quantity of wheat [5,000,000 bu.] could not appreciably affect the trend of prices in view of the fact' that the turnover on the Chicago Board of Trade is from 50 to 60 million bu. a day. . . . The transactions were of a purely business nature and were not intended as manipulations. . . . There was no investigation when we bought $250,000,000 worth of American goods, but when we sell a little wheat--oh!"

Suspicion developed that Secretary Hyde was beating this new Soviet tom-tom to divert attention from the political aspects of farm relief. Wheat state Senators who have long inveigled against Chicago grain "gambling" openly mocked him for his sudden agitation. Declared Washington's Senator Dill: "It looks to me as though Secretary Hyde and the Farm1 Board are grabbing at a straw like a drowning man trying to find the first excuse for their own failure to keep up the price of wheat."

Chicago grain dealers were hardly more sympathetic. Recalled was the fact that the Government's purchase of 60.000,000 bu. of wheat had failed to affect the price. Declared Dealer James E. Bennett of Chicago : "This is the greatest hedging market in the world and we gladly receive orders from Canada, Russia or any other country. So-called farm relief is hopelessly ineffective and it looks like somebody is looking for an alibi. Of course we must have something to wipe our feet on and Russia makes a good doormat."

But Secretary Hyde found a warm friend in Representative Hamilton Fish, chairman of the House Committee investigating Communism. Eagerly did Chairman Fish seize upon the Hyde charges as good material for his Red hunt. Declared he: "Nothing has developed recently that shows better just how far the Soviets are willing to go to carry out their doctrine and injure business and government elsewhere," promptly moved to investigate three New York brokerage houses said to have acted as agents for the All-Russian Textile Syndicate in its wheat deal.

*According to the Federal Farm Board, Russia produces wheat at 30-c- per bu. The U. S. tariff would run the delivered price up to 72-c- per bu., exclusive of freight charges. The Soviet sales were reported at about 95-c- per bu. for May delivery. Delivery would be easily possible if Russia, as has been charged, were ready to take a loss to "dump" in the U. S.

/-Hedging is a market process of equalizing profit-&-loss. A grain dealer buys 100 bu. of spot wheat at 800 per bu., simultaneously sells it for future delivery two months hence, say, at 860. The 60 differential theoretically covers the handling and carrying charge during that period. If at delivery time spot wheat has fallen to 75-c-, he is guarded against loss by his contract. Likewise if wheat rose in the interval he would not thereby profit on his contract.

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