Caught Short

Tense and nervous, speculators crowded the Chicago wheat pit one morning last week, waiting for the opening gong. When it rang, they furiously began waving orders to buy. The price of wheat futures rose by the hour, jumping as much as 8 3/4-c- a bushel. Professional speculators, who had been selling wheat short while the price was edging down, took heavy losses.

Wrong Guess. The bears had made a bad guess. They had been banking on the fact that U.S. grain elevators were so clogged with surplus wheat from last year (TIME, June 6) that farmers would not be able to store the bumper crop now being harvested--and thus get no Government support loans on it. Dumped on the market, the grain would drive prices lower.

But last week Secretary of Agriculture Charles F. Brannan suddenly changed the rules--and drove the shorts to buying to cover their contracts. Brannan had been begging Congress to give him the power to buy or build additional storage facilities. When Congress finally passed such a bill last week, Brannan acted fast. He not only used the powers Congress had just given him, but dusted off some old ones--which he had had all the time--to give the farmers a lot more.

Farmers in dry areas, said Brannan, who promised to get their wheat into storage within 90 days could get "distress" loans (i.e., 75% of a normal support loan) on wheat even if it was lying on the ground. The farmer would not be responsible if the wheat subsequently rotted; it would be graded according to its original condition. Once the wheat was stored, the farmer could draw the other 25% of his loan. The CCC will also build 50 million bushels of storage space of its own, lend farmers 85% of the cost of building their own storage facilities and, if necessary, store wheat in airplane hangars, Army igloos and other Government-owned property. Brannan even suggested emergency storage space for about 15 million bushels in the holds of the Government's "mothball fleet" of Liberty ships.

Guess Again. At week's end the job looked bigger than Brannan thought. His statisticians, revising their previous estimates of the 1949 harvest, boosted the total possible yield to 1,336,976,000 bushels, just under 1947's alltime record of 1,364,919,000 bushels. But the actual harvest, which so far had only gone through a few counties in Texas and Oklahoma, was surprisingly turning out anywhere from 30% to 50% smaller than Brannan's estimates (the farmers blamed joint worms, rain and hail for cutting it down). Nevertheless, if the crop proved to be as big as predicted, Brannan is expected to set wheat quotas for next year--first limitation in eight years--to cut down the wheat surplus.

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