Square Pegs & Round Pits

Three weeks ago Chicago's Board of Trade, instigated by Washington, set a temporary level below which grain future prices would not be allowed to sink. Last week that artificial floor was removed. Prices--which had been bobbing along on the rule like balloons without lifting power--promptly dropped the maximum amounts permitted in one day's trading. Great was the hullabaloo. Representative Jones of Texas and Senator Smith of South Carolina promptly swung inflationist thunderbolts about their heads again. Letters and telegrams poured into Washington demanding that the Government repeg prices. No such action was taken. Next morning the grain pits reopened and prices promptly dropped another level lower: dropped and bounced. They mounted rapidly and closed with substantial gains for the day. Thereafter they swung up and down, but neither sudden disaster nor abrupt boom followed. Cause of the arrested fall was guesswork. Some attributed it to talk of the formation of a $50,000,000 to $75,000,000 pool (President Peter B. Carey of the Board of Trade admitted a pool had been discussed) to buy up "distress grain" which threatened the market--the holdings of speculators caught in the July break. Others attributed the fall to the price peg, its arrest to removal of the peg. For, they argued, with the peg in there had been no free market, realistic grain traders had withdrawn from the market; with the peg removed traders had gone in again. Contributory cause that certainly helped to steady the market was that, as the peg was removed, Secretary Wallace began to talk of subsidizing the export of 50,000,000 bu. of wheat from the Pacific Northwest, and of raising the wheat processing tax to pay for the subsidy. The Secretary of Agriculture has power to fix processing taxes at an amount equal to the difference between current prices and the average price (88-c-) for 1909-14. The present tax of 30-c- a bushel represented that difference on June 15. For several weeks wheat prices have been about 88-c- but the tax continues. But the processing tax can be increased only if wheat prices fall below the June 15 level. The threat of subsidized exports may have been partly intended to support the market. It served also as a club over the conference of wheat-producing nations which met again this week in London to try to agree on crop restriction. What one nation calls "subsidizing exports" other nations call "dumping." He proposed, however, to dump wheat in the Orient, thereby cutting into the exports of Canada and Australia to those markets. Not according to the Golden Rule was Secretary Wallace's dumping threat, for the U. S. not only has a law against foreigners dumping in the U. S., but even when the Secretary made his announcement the Treasury Department was considering forbidding imports of steel from Germany, tennis shoes, electric light bulbs and calcium carbide from Japan, stearic acid and thumb tacks from Holland, rock salt from Canada, woven wire fencing, sulphide paper and binder twine from England--all on the grounds of dumping. Following his wheat export proposal Mr. Wallace announced final details of the plan to raise hog and corn prices (TIME, Aug. 21): the Government will spend $55,000,000 buying up 5,000,000 hogs (4,000,000 young animals, 1,000,000 sows about to litter.) The 5,000,000 hogs will be used to feed the unemployed. This is to remove some 600,000,000 lb. of pork from the market this year, and 1,800,000,000 lb. (16% of the pork crop) next year. Said Mr. Wallace: "I am not worried about this emergency program. But I am terribly concerned lest the Corn Belt should fail to recognize how really dangerous this program can be unless it is tied up closely to a long-term program [reduction of corn and hog production next year]. . . . The after-effects otherwise would be disastrous to hog prices for the 1934-35 season and for some time thereafter. . . . The real solution must come from the farmers themselves. No fairy wand can be waved over agricultural markets so that they will receive better prices."

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