Corn Squeeze

He who sells what isn't his'n

Must buy it back or go to prison

This little ditty, no less than 60 years old, is one of the meatiest definitions of short-selling ever penned. Last week as trading in May grain contracts drew to a close on the Chicago Board of Trade, the economic profundity of the Gould definition was clearly demonstrated once again. Speculators had sold corn they did not own for delivery on the last trading day in May. Of course, the speculators hoped that in the meantime they could buy back the corn they had sold at lower prices. But instead of going down corn went up, up, up. By last April it was selling at $1.33 per bu., a twelve-year high, and in the subsequent world-wide break in commodity prices corn suffered relatively little. Last week in a belated scramble to buy corn for May delivery, the price was squeezed to $1.40 per bu., highest level since 1920, in the days of post-War inflation.

Oats and rye also skyrocketed in the general month-end squeeze. At its peak of $1.23 1/2 per bu., rye was above May wheat for the first time in history. Rye was even being shipped westward from Buffalo to Chicago. Wheat alone declined as the first shipment of the new crop went to market in Texas. Behind the squeeze was no crafty manipulative scheme to pinch the bears for profit. It was simply a scarcity of grain, resulting from last year's drought and AAA restrictions. In the previous five years the U. S. corn crop averaged nearly 2,300,000,000 bu. annually, a figure itself on the lean side because of the very short crop in 1934. Yet last year all the corn land in the country produced only 1,500,000,000 bu. The carryover from the previous crop was a piddling 65,000,000 bu.

Thus the U. S. entered the corn year last October with nearly 800,000,000 bu less than is usually needed to feed the country's hogs, cattle and poultry. (The bulk of the corn crop goes to market as pork beef lamb, duck, turkey, chicken, milk,' eggs' butter.*) To fill their feeding troughs farmers have had to use wheat, oats rye barley, pieced out with Argentine corn 'in the six months through last March corn imports from the Argentine amounted to 42,000,000 bu., more than three times as much as in the same period the year before Plenty of Argentine corn was available last week but it was not deliverable in fulfilment of May contracts on the Board of Trade.

No sooner had trading ended in May contracts than speculative attention shifted to July and September contracts, both of which carried on the corn boom by spurting the full 4-c--per-bu. limit allowed in one session. No matter how tall the corn grows this year, the 1937 crop will not start to market until October. July corn got above as the high as $1.25 per bu., nearly 10-c-above the same wheat delivery. And the terrific demand for grain in hand for settlement of May contracts continued to be visible in a 13-c-to 14-c- premium on cash corn, 10-c- on cash rye, 8-c- to 11-c- on cash oats.

*Smart farmers use the so-called 12-10-1 corn-hog formula to determine whether it is more profitable to sell corn as corn or as pork The formula: when 100 Ib. of hog is worth more nan 12 bu. of corn, raise hogs: when worth less, sell corn. At farm prices hogs are now sellmg for about $11 per cwt., while 12 bu of corn are worth more than $15. Thus corn is favored. Originated during the War when Herbert Hoover, the Food Administrator, was trying to boost hog production, the formula is actually 11.6-to-1, but farmers dislike fractions

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