The Worldwide Squeeze

The pinch on U.S. supplies of grain and beef is only part of a worldwide scarcity of raw materials. For almost every important commodity -- meat, wheat, rice, soybeans, wool, cocoa, copper, lead, rubber-- world production is falling behind ravenous demand, and hectic bidding for supplies is rocketing prices. A Reuters index of commodity prices leaped 91% in the twelve months ended July 30.

The shortages are tilting international balances of economic power, bringing new prosperity to such exporters of raw materials as Australia, Brazil and Argentina, and fanning inflation in the U.S., Europe and Japan. The situation stems largely from a temporary combination of foul weather for crops and metal miners' strikes in Chile and Zambia. But trouble may not be short-lived. World reserve stocks of many major farm goods have been so badly depleted that years of bumper harvests will be needed to rebuild them. The scarcities are also having a snowballing effect; a shortage in one commodity aggravates shortages in others. Example: a shift in the ocean currents off Peru has almost wiped out the catch of anchovies, a major source of animal feed. As a consequence, demand for soybeans and corn to be fed to cattle and hogs has speeded up sharply, worsening shortages of those foods, and also of meat.

In several cases, the gap between world supply and demand does not seem great. But the effects are being magnified by two kinds of hoarding. Some exporting nations, including the U.S., are deliberately restricting worldwide shipments of scarce commodities in order to keep more of the supply for their own consumption; and some big importers, especially Japan, are desperately buying up all the commodities they can find. Among the major problems:

MEAT: World production rose only 1% last year, not enough to keep up with the increase in population--or the burgeoning demand in industrialized countries that are experiencing an inflationary boom. Output in the European Common Market actually dropped because of a blundering policy that encouraged farmers to reduce cattle herds in order to eliminate dairy-product surpluses.

WHEAT: Total world exportable supplies are estimated to be anywhere from 48 to 62 million tons this year. At best, that will be down from last year's 69 million ton supply, and will fall short of global import demand calculated at 65 million tons. The Soviet Union will be buying wheat again because it is falling below its harvest target, though less disastrously than in 1972. The Common Market last month banned all exports of wheat from its nine member countries until further notice. Argentina, normally an exporter, bought wheat in the U.S. last week because it has overcommitted its crop.

WOOL: A long period of low prices and drought cut the sheep flock in Australia, the major supplier, from 180 million in 1970 to 142 million last March. Since 1970-71, prices have soared from 92-c- per kg. to $2.59.

RICE: This year's shortage could be the worst in a decade, and it has become a hot political issue in Asia. Thailand, the big exporter, restricted shipments after Bangkok residents rioted last month to protest zooming prices. In the Philippines, government officials say they will classify hoarding of rice or profiteering as "economic sabotage" --a crime punishable by death.

That only begins the list. The scarcity and rising costs of scrap metal could cut steel production in many countries, including Italy and Argentina. Because of the short supplies and zooming prices of cocoa, America's 10-c- chocolate bar will be either cut down in size or boosted to 15-c-.

The results of the scarcities vary wildly from nation to nation. Exports of high-priced wool, meat and wheat earned Australia a trade surplus of $2.9 billion in the last fiscal year--more than double the record of the year before. Brazil's profits on high-priced soybeans and coffee, and Argentina's on meat, will more than offset costlier imports of cars, appliances and other finished goods.

On the other hand, the U.N.'s Food and Agriculture Organization warns of possible food shortages in some of the poorest countries on earth: Bangladesh, Botswana and Swaziland, to name a few. And for the industrialized world, says Otto Eckstein, a member of TIME'S Board of Economists, the commodity price "explosion" caused by shortages amounts to "an economic disaster of historical proportions." The U.S., which produces many of its own commodities, has not been the worst hurt; that unwelcome distinction goes to Japan, which must import nearly all of its raw materials. Last year Japanese trading houses ordered their agents to buy up all the commodities in sight at any price. They succeeded, but at the cost of aggravating one of the world's worst inflations (more than 11% annually). The Japanese have even offered to finance wool production in Australia and to buy now for cash at present prices all the soybeans that can be grown in the Brazilian state of Rio Grande do Sul for the next ten years. The Brazilians refused. They are betting that shortages will enable them to get even higher prices in years to come.

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