Cropping the Price

Of all the forces driving up U.S. living costs, none has been more powerful than the two-year climb in the prices of American farm goods, which has kicked the nation's food bill to record levels. The prime cause of the boom has been the global demand for American-grown food. More recently, speculators bid up U.S. farm prices higher than even the heavy press of foreign orders warranted. Now, however, American consumers are getting the first signals that the worst is over. Since late February, prices on the Chicago Board of Trade and other commodities markets have been falling along a broad range.

Contracts for July delivery of wheat, which sold in February for as much as $5.85 a bushel, are now down to about $4.10. Corn has dropped from $3.50 a bushel to $2.55; and soybeans have fallen from $9.03 to $5.35. A dive in demand for red meat at supermarkets, reflecting consumer resistance to high prices, has hit the cattle market. Steers last week sold for $41.50 per 100 Ibs. v. more than $50 in late January.

A major reason for the price decline was that speculative fever began to cool as optimistic crop reports began rolling in. Rumors that the Arabs were about to lift their oil embargo against the U.S. also eased fears of uncontrollable inflation. The present prices, however, are still far higher than a year ago, and few experts are predicting any further substantial drop until the dimensions of this year's harvest are clearer, both in the U.S. and abroad. Rising costs of farm labor, fertilizer and machinery will also work against a further price drop.

In any event, forecasting the commodities market is risky because it is so sensitive to outside influences--wars, droughts, abrupt political changes. One major imponderable is whether India will make massive wheat purchases in the U.S. and elsewhere. If it does, some prices could shoot back up.

On the other hand, there are reasons for optimism. World grain production for the 1974-75 crop year is expected to total nearly a billion tons--31 million tons more than the year before. For the first time in two years there is enough wheat to come close to meeting demand in the months ahead. Australia alone has just harvested 440 million bushels, more than double last year's crop. Adequate supplies of livestock feed also seem likely. Brazil's record soybean harvest is now being sold round the world and, after a disappearance of a year and a half, Peruvian anchovies, used as a livestock feed supplement, are again being caught. The rise in world farm production should ease demand pressure on this fall's U.S. harvest, which may set yet another record.

The commodity price declines have not yet put much of a dent in retail food prices, which are still reflecting the dizzying spiral of the last two years. But if the raw-goods prices hold around present levels, consumer prices eventually should at least level off. They would still be distressingly high, but consumers can take some consolation from the thought that the price upheavals of the last two years are not likely to be repeated.

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