High Jinks in Rye

Said one Chicago grain trader last week, "There's a lot of funny business going on in the rye market."

The Department of Agriculture thought it detected something funny, too. But it was not exactly sure what. So it was suspiciously eying every deal in the busy rye pit of the Chicago Board of Trade (see cut).

The flurry in rye trading began in the spring of 1943, when big General Foods Corp. accumulated 8,000,000 bu. of rye futures. General Foods hoped it could use rye as a substitute for scarce corn in one of its grain syrups. It could not, but held on to its rye anyway, as: 1) a hedge against a corn shortage; 2) a hedge against higher prices in other commodities General Foods uses.

Rye speculators scrambled to tie up most of the remainder of this year's crop (27,000,000 bu.) by buying rye futures (i.e., contracts) to deliver rye in December. Large chunks of refugee cash, looking for a profitable place to light, were also plunked down for rye futures. Wheat and corn speculators, balked by ceilings, crowded in on ceilingless rye. Rye prices started up. In a few months they rose some 30-c- a bu. Chicago's storage elevators became clogged with rye being held off the market for higher prices. Minneapolis' giant Cargill Grain Co., one of the biggest grain operators in the U.S., reportedly caught short, desperately scrambled to get enough rye to fill its future contracts.

Then the bubble burst. Shrewd Cargill wriggled out of its short position by buying Canadian rye, shipping it into the U.S. General Foods began to unload some of its rye. The corn crop turned out to be a whopper, and distillers decided that they might get some of this for whiskey. Furthermore, use of rye in industrial alcohol is no longer compulsory. During November, rye prices slipped 3-c- a bu.

The speculators were afraid to unload for fear of driving the price down further. As a result, Chicago elevators are still jammed with 9,000,000 bu. of rye and there is no place to store the incoming corn and wheat crops. To try to make room, the Government rationed elevator space. At week's end, speculators holding December rye contracts were scurrying around looking for buyers. The deadline for taking delivery of grain is the last of December, but buyers are scarce. And speculators are painfully aware that when buyers are scarce--and when there is plenty of grain--prices go down.

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