The Battle Begins

The U.S. last week nervously witnessed the first post-OPA skirmish between supply & demand. It started briskly. The New York Journal of Commerce commodity index rose 8.9 points to a new high of 129.1. But there was relatively little scrambling for merchandise by retailers, consumers and wholesalers. The market seemed not so much free as bewildered. In general, businessmen waited to see whether OPA was really dead (see NATIONAL AFFAIRS).

Dead or not, the spotty rises in the prices of basic materials and commodities were helping erect a tombstone over OPA. It would be hard, if not impossible, to roll prices back, even if OPA were resurrected. But not for weeks or months would the creeping commodity increases come out in retail price increases. Many a businessman who had pledged himself to hold the line would find that he had little choice if the basic pressures became strong enough. How strong had they grown in a week?

Rise in Steel? The steel industry, operating at 89% of capacity, moved cautiously in the direction of price rises. The industry, the basic price barometer for durable goods, wanted to give no aid to the return of OPA. But bituminous coal prices had gone up an average of 40 1/2-c- a ton a fortnight ago as part of the coal strike settlement. Ore prices edged up. So did pig iron. In Birmingham, two plants boosted prices $3 a ton. Scrap dealers were tightly hanging on to their scrap for the expected big boost and an acute shortage was in the making. The pattern of price increases among suppliers was plain; Pittsburgh gossiped that certain types of steel would soon rise anywhere from $1 to $6 per ton.

Other metals were already up. Platinum prices doubled. Zinc went up 1 1/4-c- to 9 1/2-c- a pound. Copper, tied in with OPA subsidies, waited on Washington developments. But the best guess was that low-cost copper producers would continue to sell at the OPA ceiling of 14 3/8-c- a pound. High-cost producers would probably boost their price to 15-c-.

Building materials edged up. Although wholesalers were holding their prices steady, they grumbled that retailers were already selling lumber at $2 to $10 per thousand feet above former ceilings.

Rise in Cotton. Cotton, which had not been under a ceiling, soared as if it had to the highest level in 23 years. On July 1, December cotton futures on the New York Cotton Exchange hit a high of 31.90-c- a lb. But two days later the market dropped, and prices were not far from where they started. Textile men talked price increases but, in general, did not make them. Reason: cotton cloth output is up 35% over the preWar average, and supply is expected to catch up to demand before the close of 1946. Price boosts may bring the seller's market to an end even sooner.

In food (and rents) the boosts were big and fast. It was meat that gave the spectacular example of supply & demand. In the first day of free trade at the Chicago stockyards, prime beef jumped to $22 a hundredweight (OPA ceiling: $18), hogs were up to $18.50 (ceiling: $14.85). Then the farmers, hurrying to cash in on the high prices, began to pour in cattle by the thousand. One day alone brought in 20,000 hogs, greatest number in six months.

Beef and hog prices sagged. By week's end, many steers were bringing only 50-c- a hundredweight above last week's OPA ceilings. Hog prices were down to within 50-c- to $1.40 of ceilings. And before long, prices will feel the effect of the grass-fed beef which will soon start moving off the ranges. The big packers were still buying little. They were afraid of losing their subsidies if OPA comes back. And they intended to wait for the lower prices that would surely come if cattle continued to pour in.

Furthermore, the unrealistic corn-hog price ratio that had kept so many hogs on the farm, and so much corn going into them in the last year or so, was done for. Cash corn soared from $1.46 1/2 to $2.25 a bu. at Chicago, far too high to make it profitable to feed it to hogs. Instead, it came off the farms (1,000,000 bushels in one day).

Rise in Wheat. The rise in wheat was equally spectacular. Cash wheat in Chicago, at $2.18 1/4 a bu., up from $1.97, was the highest since 1920. Even with the bumper crops expected this year, most grain traders think that wheat will stay up there because of the world demand. Moreover, farmers were having a tough time getting their grain to market. The shortage of railroad cars had forced many of them to pile it up in the open fields alongside the tracks (see cut). At week's end, drenching rains had spoiled half the grain stored in some fields.

Most traders claimed that the grain and meat prices, despite their upswing, were still below black market prices under OPA. Actually, the rise was caused, to some extent, by the elimination of subsidies, i.e., the consumer was simply paying the bill in another form.

Yet the price rises in one week of free markets, big as some were, were not enough to persuade Wall Street that this was to be the pattern. The stockmarket rose slightly at the beginning of the week, then sagged down again. For four years, the Big Bull market had been riding up on inflation. Now, when there were cries on all sides that the greatest inflation was yet to come, cold-eyed speculators were not so sure. They wanted to be surer before they bet on it.

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