Squeeze Sequel

There is enough surplus sugar in the world (about 7,500,000 tons) to supply the U. S., biggest sugar-eating nation, for a year and a half. But two months ago, for technical reasons, short traders on the New York Coffee & Sugar Exchange could not get enough sugar to fulfill December contracts of 26,450 tons (TIME, Dec. 31). The AAA quotas for Hawaii, Puerto Rico and the Philippines had been filled for the year. Cuba had given to U. S. refiners what amounted to an option on the rest of the Cuban quota. Surplus sugar accumulated from other years was not tenderable in fulfillment of Exchange contracts. So the shorts caught in the squeeze defaulted, were ordered to liquidate their contracts with the long interests at 2.08-c- per lb. cash, which the Exchange claimed was the last spot quotation, plus a penalty of 1/4-c-per lb. The longs complained that this was a sour settlement for them, that they should get more. Last week, while longs and shorts were bitterly criticizing each other and while the U. S. Senate was passing a resolution to investigate the squeeze, the Coffee & Sugar Exchange scolded both longs and shorts, suspended one sugar brokerage house from the Exchange for 18 months.

Seven firms, including Eastman, Dillon & Co. and Lehman Bros., were "admonished" although the Exchange considered the circumstances in their cases "mitigating and understandable." Six others, including Hayden, Stone & Co., reputed to be one of the two biggest shorts involved, were "censured" for failing to cooperate with the Exchange in reaching a settlement. Suspended were B. Wheeler Dyer and his sugar brokerage house of B. W. Dyer & Co., reported to be the other big short. Then the Exchange quietly let it be known that, so far as it was concerned, the incident was closed.

Both longs and shorts sprang forward to attack the Exchange. Broker Dyer, a square-jawed man of 47 who cut his teeth in the sugar business as an office boy 31 years ago, declared: "My conscience is absolutely clear of any wrongdoing, and it is plainly a case of where I have been made the 'goat' to cover up errors of omission and commission of the board of governors of the New York Coffee & Sugar Exchange. . . . Practically without exception my firm and clients were not net short of sugar, but were short of December against other sugar that could not be delivered. . . . The cause of complaint was the technical corner which existed in the midst of plenty. . . ."

A protective committee of longs, smarting from their scolding, howled for a more drastic penalty from the shorts. Said its Chairman Carlos G. Garcia: "This ruling is extremely unfair. It shows the rankest kind of favoritism on the part of the Exchange officials. It shows extreme partiality toward a group of professional traders, and convinces us that the public has no chance on the New York Coffee & Sugar Exchange."

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