Role in Food Shortages and Inflation
Relationship of Grain Markets to Grocery Prices
The gyrations of American commodities markets in recent months hearken back to The Pit, Frank Norris's novel of turn-of-the-century grain trading in Chicago—a portrayal of vast speculation in distant crops yet unharvested and of fortunes made and lost within the range of a day's price quotations. Fueled by mounting food shortages abroad and by massive exports of U.S. farm products, the commodity exchanges this year have reeled under wave upon wave of spectacular price movements, most of them upward.
In just one year, the price of soybeans nearly quadrupled, rising from $3.30 per bushel in July 1972 to $12.27 in July 1973, then dropping back to $6.50 in early September. Wheat hit an all-time high of $5.24 a bushel, compared with $1.50 a year ago, and corn rose to $3.40 a bushel, up from $1.15. The Dow Jones Commodity Futures Index topped 300, doubling its level of a year ago.
The “commodity inflation” had a predictable effect on American consumers. The Labor Department reported a 6.2 per cent rise in the wholesale price index and a 10.8 per cent jump in the retail price index during August. Food prices were 19.3 per cent higher at wholesale, and 28.8 per cent higher at retail, than they were a year earlier. With commodity markets still in a highly volatile situation, most experts predict even higher prices ahead. Dissenters included Agriculture Secretary Earl L. Butz and Treasury Secretary George P. Shultz. On Sept. 7, Butz told reporters that “half of the gain in wholesale farm prices announced today has been wiped out.” Shultz said that the August sampling caught prices at their peak, and that “my instinct is that we have seen the worst of the food price problem.”