Pocket Full of Rye

In the wartime rye market--the one grain on which there were no ceilings--the sky was the limit on the wild speculation. Last week a Department of Agriculture referee, in preliminary findings, told just how wild it was: he found General Foods Corp., Daniel F. Rice and Co., and four members of the Chicago Board of Trade guilty of trying to corner the rye market.

General Foods, said the referee, first went into the rye market in December 1942 (General Foods' reason: to hedge against losses in wheat and corn). General Foods' Executive Vice President Charles W. Metcalf bought so heavily in rye and rye futures (i.e., contracts to receive rye at a future date) that by December 31, 1943 General Foods was close to having a corner with 76% of all the deliverable rye in Chicago. The worried Chicago Board of Trade meanwhile got Metcalf to promise that General Foods would buy no more rye without the board's consent.

Buy Futures. Shortly thereafter, General Foods hired Chicago Broker Daniel F. Rice & Co., supposedly to sell its rye. Instead, Broker Rice bought heavily in May 1944 rye futures for himself and 23 of his customers.

Metcalf added to the squeeze; he acquired 125,000 bu. of May futures for himself and family. (Later, said the report, General Foods executives forced him to resign because of his side speculation.)

By April 29, 1944, the corner seemed vise tight. General Foods, Rice and their cohorts had May futures contracts calling for delivery of 5.7 million bu. of rye. But there were only 4.2 million bu. of rye available in Chicago. Speculators who had sold rye short, gambling that the price would drop before they had to deliver, scurried for cover. They had to find rye or pay through the nose.

Buy Trouble. Their only hope was to get rye in Winnipeg. Rice & Co. and General Foods hastily tried to bottle up the Winnipeg rye market. But one of the shorts was wily Cargill Grain Co., an old hand at corners. Cargill hustled enough Winnipeg rye to Chicago to break the corner, and drive down the price of rye futures, which had risen from 64 1/4-c- a bu. to $1.32 5/8. Two years later, it rose to $2.86 but General Foods had sold out. Final loss to General Foods: $210,000.

If last week's findings are finally approved by the Department of Agriculture, as seems likely, General Foods will be punished even more. It will be suspended from commodity trading for one year. Said General Foods weakly: "Somehow or other we just don't feel guilty of anything."

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