Costly Rains

If current activity on the Chicago Board of Trade, the world's largest commodity exchange, is a reliable indicator of future food prices, housewives might have to spend more at the grocery store next year for such basic items as bread, flour and meat. Grain dealers and agribusiness giants such as Ralston Purina and Quaker Oats sell and buy future contracts on the exchange--and each transaction really amounts to a bet on what commodities will actually sell for in one to nine months. Since November, the 124-year-old exchange's volume record and many of its price records have been broken as frantic traders have bid up many farm products. Early this year, for example, wheat was selling for around $1.48 a bushel for deliveries in March, but traders are now agreeing to pay $2.69 a bushel. Such sky-high prices will push the value of all commodities traded on the exchange this year to an estimated $120 billion, a 36% increase over last year's record of $88 billion.

Traders on La Salle Street expect a shortage of many crops, and with good reason: demand for U.S. grains is increasing faster than farmers can harvest their fields. In July the U.S. made a billion-dollar deal to supply Russia with wheat and other crops. Then China bought wheat from the U.S.; now India needs wheat to avert a potential famine. The U.S. Department of Agriculture anticipated bumper crops this year--but then the rains came. Since September, the beginning of the Midwest's harvest season, unprecedentedly heavy rains and freezing temperatures have repeatedly mired farmers' machinery in axle-deep mud. "Parts of Illinois, Indiana and Ohio look like lakes," moans Owen Nichols, chairman of the Board of Trade, who recently inspected Midwest grain fields. As much as 25% of some crops must still be harvested. A few farmers in Missouri have bought mules to take over from their tractors in an effort to hand harvest the rest of their crops. The frenzied trading and rising prices in the Chicago "pits" add to the problems of Nixon's economic planners. They have sternly resisted the idea of putting raw agricultural prices under control, but they know too well that food costs are the weakest point of the Phase II program.

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