Purge in Pepper

The 1941 rise in commodity prices got a step nearer the serious stage last week.

Helped along by the shipping shortage and the Fulmer farm-loan act, the wholesale price of many a kitchen necessity was at or near a four-year high. Wheat was 9% higher than in January; butter, 18%; sugar, 17%; coffee, 45%; cocoa, 56%.

Part of these advances were already being felt in the retail markets, which is to say the housewives' pocket: the Bureau of Labor's index of retail food prices is up more than 4% since Christmas. Thus OPACS had a political as well as economic reason to take action. Last week it did, but consumers did not feel it. John Kenneth Galbraith, Princeton economics teacher who is Leon Henderson's price chief in OPACS, came down like a ton of brick on the high cost of--pepper.

The average housewife spends about 35-c- a year on pepper, which until last week stood in danger of becoming 36-c-. But from the technical standpoint, pepper was the logical choice for a laboratory experiment in how OPACS can control prices without legislation. Of all commodities, none is more intriguing to speculators than pepper. Since January, most of the U.S.

supply (enough to last three years) has been in the hands of two or three speculative groups, who bought their way in for about $800,000 and have pushed the price from 4 1/2-c- to a peak of 7 5/8-c- a Ib. This increase of 70% in four months compares with an average increase of 6% for all commodities.

Last week Dr. Galbraith, viewing this "bad situation," invited Chairman William Hine of the New York Produce Exchange's pepper committee to Washington. When Hine and other peppermen arrived, Galbraith announced, "We are not going to let the shipping shortage bail out the speculators." Then he bluntly told the brokers they had two ways out: 1) a margin requirement of $1,000 per unit (33,600 lb.) instead of $350, and an end to pure speculation, or 2) an OPACS-imposed price ceiling "considerably below the current price." Cowed, the brokers gulped assent to the margin boost. Next day pepper prices dropped a cent to less than 6 1/2-c- a Ib.--the sharpest drop in the four-year history of the pepper market.

OPACS, pleased with the success of Dr. Galbraith's fight talk, planned to try the same technique on other commodities--eventually, on some important ones. If they respond as well as pepper, OPACS thinks overall price legislation (for which plans are now before the President) will not be necessary for some time.

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