The Commodity Credit Corporation announced its buying program on June 3 and immediately began to buy the new wheat being har vested in the Southwest, and continued steadily and is still buying wheat. Fortunately, the railroads were able to supply boxcars a required, and the movement of new wheat was the greatest after harvest movement ever recorded in the Southwest. The Commodity Credit Corporation dipped freely into these supplies as the whea moved. It set a price it was willing to pay of $2.25 at Kansas City and purposely made enough higher than the Government loan pric to keep farmers from making loans and thus tying up the wheat This condition prevailed through June and July and up to the middl of August.

The Government, in effect, made the market and the prices a Kansas City held over that period in the narrow range of from $2.20 to $2.30 a bushel. The movement was so large that the Governmen bought up to August 15, 75,000,000 bushels in the Southwest of wheat without disturbing the market. There was still enough coming into the market to supply commercial needs.

By August 15, however, the picture changed. The movement of the farms began to taper off and it began to appear clearly tha supplies of wheat would be much tighter than originally thought, and for several reasons. One was the corn and oats crop would be seriously short; corn, 800,000,000 bushels less than 1946. This indicated a greater demand for wheat. Two, the Canadian wheat crop was sharply cut, indicating a greater foreign demand for our wheat; three the Commodity Credit Corporation buying was reported; four, the movement of grain off the farms was reduced.

From August 15 the market began to rise, and it is this rise for which the exchanges are being condemned. It is said that speculation is responsible for this price increase. I say the reason is that the market is being constantly drained of its supplies. The amount available in commercial channels is too small to assure even domestic requirements, much less to meet the extraordinary demands from abroad, and the market price rises because buyers must bid against each other for the quantity available, the scant available supplies.

Now, we come to this chart, gentlemen. No. 1 represents the cash price of wheat; that is the red line on the chart. No. 2 is the nearby future, which starts out with September and then changes over te December, and that is the green line.

No. 3 is the May wheat price all of the way through.

I shall speak first of the cash price. On August 15 it was $2.29% From that time it moved steadily upward with no significant interrup tion to September 8, reaching $2.55% on that day. Why did the market rise in this way? Because every day in this period Com modity Credit Corporation was buying wheat, and by September & had bought upward of 90,000,000 bushels from the Southwest on the crop.

The southwestern farm movement was shrinking and supplies were getting low. Every bushel bought by the Government meant that much less in the market for the mills. On September 9, the market rose 9 cents, and on the 10th another 7 cents, or 16 cents in 2 days. It was reported that more realistic Washington officials in charge of Government buying were resigned to $4 wheat probably early next year, and it was further reported that the Government would go ahead

with its relief plans regardless of questions of financing shipments broad.

On September 15 there was another sharp rise of 8 cents, springing rom mill buying in a market with scant supplies, together with a tatement then from Washington that the supply situation was so cute that some form of rationing would be invoked. From this high point on September 15 of $2.744, the market fell back to a low of $2.50%1⁄2 on September 20. That is a decline of 24 cents. There was break of 18 in 3 days. This was due to news from Washington hat export allocations were being revised downward and a statement by Secretary Anderson that his Department wanted to put brakes on the State Department's goals which could only be met, it was said, at terrifying levels of prices.

But on September 22, a sharp recovery occurred. The market stepped up 7 cents, and there was more talk of critical world food shortages. Mr. Herbert Hoover and other leaders emphasized the shortage. The Cabinet met to consider it. Secretary Anderson was reported to have said that only 350,000,000 bushels could be exported. That statement pointed up the tight supply situation while the State Department asked for much more.

The price strengthened after this date and by September 26 it had reached $2.661⁄4 from the low of $2.50%1⁄2 on September 20. The Daily News contained reports of renewed activities by Commodity Credit Corporation and reports that the Cabinet had approved plans to export 400,000,000 bushels of wheat. The President's statement on export plans and the world situation was a sustaining factor. PMA boosted its export flour price. On September 27, the market was up 4 cents, and on September 29, 10 cents, and on October 1, 5%1⁄2 cents, a total of 19%1⁄2 over 3 days. Statements were made that the Government had no intention of trimming its export goals. There was a prospect of expanding the relief program by 100,000,000 bushels on the report of President Truman's committee on foreign aid.

The Commodity Credit Corporation bought 5,000,000 bushels over the next 3 days. The market has now reached $2.86 and we are on a new plane of high prices, and from then on the market has held pretty much between $2.80 and $3, as that will show.

Now, from there on, gentlemen, I have not taken the day-to-day fluctuations, because they are pretty much the same stuff, but it is in my report on page 8 if you care to read it.

The CHAIRMAN. Prices have again reached the peak of October, have they?

Mr. STURTEVANT. No; they are over here. vember 17, they are not quite back up there.

So far as we go, No

The CHAIRMAN. I asked as of today. That is what I am talking about.

This is December.

Mr. STURTEVANT. We have not gone that far. I think that they have.

The CHAIRMAN. They have passed the October peak?

Mr. STURTEVANT. Yes, sir; I think that they have.

Please observe that over all of this period the cash price has been consistently over the futures price, which I think is very significant. There is no exception to that. It was the day-to-day demand for wheat that was making the market. If it were a fact that speculation

in the futures markets were making an artificial market, the cash line would be consistently below the futures line.

Now, notice the line showing the May futures, just the lower line At all points below the other lines, and since October 1 from 15 to 20 cents per bushel under the cash prices. This is an abnormal spread due to the extraordinary demand for cash wheat. The volume of trading in May futures is greater than in the December futures. I speculation were responsible for present high prices, the May futures would reflect this condition. The Commodity Credit Corporation has bought wheat out of this year's crop in the Southwest amounting to over 120,000,000 bushels. It is absurd to think that anything like this amount could be subtracted from the supply without putting the market up, and as the Government continues to buy farmers shut off the movement, thereby intensifying the rivalry for the available supplies.

1

October 1 farmers in the Southwest stil: held on their farms or in commercial storage fully one-half of the crop. They have not sold freely since then.

Senator WATKINS. How was that ascertained? How do you know that that is the fact, that they actually hold that?

Mr. STURTEVANT. The Government puts out on October 1 a statement showing the amount on the farms.

Senator WATKINS. How do they find that out?

Mr. STURTEVANT. They have their county agents and they go around and find it out, and each county has an agent and they ascer tain the amounts through those agents.

Senator WATKINS. By actual contact with the farmers?

Mr. STURTEVANT. I do not know how they go about it, but I imagine that that is the way, we take those figures as correct, those are the only ones that we have.

Senator FLANDERS. In general, you trust those figures?
Mr. STURTEVANT. Yes, sir.

Senator WATKINS. Have you found them in the past to be reliable? Mr. STURTEVANT. We have not found them off too much; we all take them as reliable.

Senator WATKINS. Well, in view of the heavy movement of grain early in the seasons, I wondered if there was a possibility that those figures were not reliable.

1

Mr. STURTEVANT. You must realize, Senator, that we had the. biggest crop we have ever had. For instance, Kansas raised almost 300,000,000 bushels of wheat; that is at least 100,000,000 over former big crops. We have had over 200,000,000, but 300,000,000 is unheard of. This is a double crop. It was, almost.

Senator WATKINS. Is that because of increase in acreage?

Mr. STURTEVANT. Ideal weather conditions and high prices, that always means more seedings, and they broke up more ground and more pasture land was broken up.

Senator WATKINS. Pardon the interruption. I wanted to get that clear.

Mr. STURTEVANT. That is all right.

Farmers are reluctant to sell because they do not wish to add to this year's taxable income and look forward to a tax reduction next spring.

Two, the outlook for the winter wheat crop is not promising.

Three, they realize the desperate need for wheat and foresee higher rices. The supply situation was indicated by the so-called visible upply, that is the stocks of wheat in the grain markets. Sixty-five ercent of these stocks are in the southwestern markets and the larger roduction is owned by farmers who are not selling.

I will now give you an actual review that we made in Kansas City. The largest stock of wheat is in Kansas City, that is the largest stock the whole business, 30,000,000 bushels at present. Of that amount, n November 15, the farmers owned 50.7 percent, and the Government 28.7 percent. Other interests owned 10.3 percent. That 10.3 percent is the amount that the merchants like myself have available or sale, which is 3,000,000 bushels. In other southwestern markets armers owned 69 percent.

Speculation is not the cause of higher or high prices of wheat. This commodity is scarce in the market place and getting scarcer as the Government continues to buy and the farmers refuse to sell. There is keen competition for available supplies. Naturally, prices are bid up. The market is dominated by Washington news, and it moves up or noves down as the Government authorities say they will or they will

not.

One day it is said only 350,000,000 bushels can be shipped abroad, and another day it is 400,000,000, and again it is 500,000,000; and then news comes that the Government will stock pile wheat regardless. of goals and take all it can get. One day it is to be rationed or allocated, and another day it is not. All of these stories have a bearing On the question: How much wheat will there be for mills?

Mr. Chairman, may I ask you to turn to page 8 on my statement. I want to correct a word there.

The CHAIRMAN. That is on page 8?

Mr. STURTEVANT. Yes, sir; the last paragraph, the first sentence. The word "wholly" should be "mostly." It was a typographical error, and I would like to have it changed.

The CHAIRMAN. I suppose the effect of this comes from the fact that the domestic demand is known to be more or less stable and it is pretty well known just what it is.

Mr. STURTEVANT. The domestic demand is fairly well known.

The CHAIRMAN. And so the variable in the situation is the amount. that is to be exported.

Mr. STURTEVANT. That is the key to the whole situation.

The CHAIRMAN. That is what gives that the extra weight even though perhaps it is not as big as the total domestic demand.

Mr. STURTEVANT. And that is the important thing, as to exactly what you are going to export instead of jumping all around.

Senator WATKINS. What about the amount that will be fed because of the short corn crop? Does that not enter into the picture? Mr. STURTEVANT. That enters into the picture, but that is governed by the price, the high price will mean less feeding.

Senator WATKINS. Is it too high to feed economically?

Mr. STURTEVANT. I am not able to answer that, sir, I am not a cattleman. I think that it is in realm of possibility, though.

Senator WATKINS. For instance, take the poultry and dairy industries, they have to feed some grain, and if they cannot get corn,. they are likely to feed wheat, are they not?

Mr. STURTEVANT. They prefer not to, I think, at this price.

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Senator WATKINS. We have to have milk and we have to have poultry products, and we cannot get along without them, and there is bound to be a certain amount.

Mr. STURTEVANT. A certain amount; yes, sir.

Senator WATKINS. Will that amount not be increased by reason of the short corn crop?

Mr. STURTEVANT. But you have a counteracting high price which would mean that they would market their stuff quicker, which would refer more to cattle than to poultry; but there is always a certain amount fed, and that is a variable amount.

The CHAIRMAN. The evidence here is that the hogs and cattle are now to be marketed at much less weight, which indicates, I suppose, less feeding because of the high price of feed.

Mr. STURTEVANT. That would follow; yes, sir.

Mr. Chairman, maybe I was not explicit enough about this chart. My purpose in bringing this chart was to show the gyrations of the market caused by the various statements coming from official sources out of Washington.

The CHAIRMAN. Do you attempt in your statement to tie those smaller items up to particular statements or not?

Mr. STURTEVANT. It is all covered in the statement.

I did not take every up and down, because it would be too long but it is all in the statement. Every day is taken care of, I think.

The CHAIRMAN. Is it related to actual purchases?

Mr. STURTEVANT. That is right.

The CHAIRMAN. That is by the Commodity Credit Corporation? Mr. STURTEVANT. Purchases and in addition to that statement that had a direct bearing on how much we were going to export, which gets back to purchases.

The CHAIRMAN. Can you tell us in a rough way when the Commodity Credit Corporation was buying and when it stopped buying? Mr. STURTEVANT. I think so. Mr. Scott tells me it was not in there because we were not able to get the information accurately. We did have the information of when they were buying, but as I recall it, in our market they would never say definitely they were out of the market. They would mere say they would let us know later. and it might go a day or so, and you would not know whether they were buying or whether they were not.

The CHAIRMAN. You think the chief effect is the changing estimates of exports?

Mr. STURTEVANT. There is no doubt about that, Senator, and that is a very important thing. Fifty million bushels difference in this figure would make all of the difference in the world, and if we could determine definitely what we had to export, that would help us an awful lot.

The CHAIRMAN. Are there any questions?

Senator WATKINS. I would like to know if there are any buyers in the market other than the Commodity Credit Corporation for foreign export.

Mr. STURTEVANT. There is very little foreign business done.

There

is some done to South American nations, but the Government handles most of that on allocations.

Senator WATKINS. Does the Government do the buying as well as make the allocations?