The New Shakeout

In the Chicago grain pits, traders had a nervous eye on the calendar. Exactly a year ago, grain prices had tumbled in the worst shakeout in seven years. Last week traders had more than the calendar to make them nervous. The Department of Agriculture announced that it would not put any acreage restrictions on this year's corn crop. With the market already glutted, that seemed to mean another big crop and still lower prices ahead.

Traders swarmed into the corn-futures pit waving orders to sell. The selling deluge quickly spread to wheat, oats and rye. Prices tumbled. By week's end, cash corn had dropped 16-c- to $1.23 a bushel, lowest price in three years. May wheat, worth $3.06 before the 1948 break, slipped down to $2.17, and September futures dropped 6-c- to $2.

Farmers and traders, who had thought that grain prices had hit bottom because they were at Government-support levels, were fooled; the artificial props could not support the weight of the glut. For various reasons, including lack of storage space, farmers had been forced to sell below support levels. Cash corn was down 36-c- below the support level; September wheat, 19-c-. Said one trader: "It looks as if the Government may have bitten off more than it can chew."

As it had a year ago, the uneasiness on the grain market quickly spread to the stock market. The Dow-Jones industrial average fell 3.52 points for the week to 175.60, wiping out all the gains since mid-December (at the start of this week it dropped again). The New York Cotton Exchange quivered sympathetically; prices tumbled 95-c- to $1.30 a bale.

One Man's Meat. All this meant a still bigger drop in the cost of living, which was precisely what the U.S. consumer had been hollering for. Hogs slumped to within 50-c- of the OPA level. Cattle worth $28.50 a hundredweight a week ago dropped to $24.50. Retail meat prices came down another 2-c- to 4-c-, chain stores trimmed egg prices 6-c-, wholesale soap came down 6%. Whether meat would continue the fast drop was questionable. Thousands of sheep & cattle had already died in the blizzards on the rangelands, though ranchers were desperately bulldozing paths through the snow to get their animals to food and water. The heavy losses already were bound to cut the supply of lamb, at least.

The drop was not only in foods. Some oil companies, in their fourth successive slash in the price of fuel oil, brought the total cut to about 33%. In two months lumber had felt its biggest price spill since war's end. Prices of secondhand automobiles, both "new" and used, came tumbling down. Dealers were so overstocked with "new-used" 1949 models in the higher-priced cars that they had cut their buying offers to 10% and 15% below list prices.

Another's Poison. The oversupply which brought prices down also brought some cutbacks in production--and employment (see NATIONAL AFFAIRS). Last week, there were new layoffs and cutbacks, which took some more steam out of labor's fourth-round wage demands. In the New England textile industry, the C.I.O. lost its third arbitration case (for a 10-c--an-hour raise) in two weeks.

But in the last three weeks unemployment insurance claims had dropped 20%, indicating the layoffs had tapered off. Some companies which had nervously laid off workers found that business was not as bad as they had feared. Westinghouse Electric Corp., whose Mansfield, Ohio appliance plant had gone on a five-day week, put its 1,600 workers back on a six-day week, hired 100 new ones, and stepped up refrigerator production 20%. Said Westinghouse Vice President J. H. Ashbaugh, boss of the Mansfield plant: "Our confidence is based on the sincere belief that 1949 will be another good year for general business in the U.S."

Secretary of the Treasury John W. Snyder said the new shakeout was nothing more than U.S. business "getting back to normal." Businessmen hoped the process would not be too painful.

This file is automatically generated by a robot program, so reader's discretion is required.