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low prices for the products they use. The Pacific egg-pro- 

 ducer, the New York dairy farmer, and the Corn Belt hog 

 farmer are no exceptions; but this general approval has been 

 shortlived. An inadequate supply of grain at a low ceiling 

 price is much more disturbing than an adequate supply at 

 a high price. 



Frozen Prices Mean Frozen Supplies 



The government's adventures in fixing the price of corn 

 were something like those of Alice in Wonderland. Effective 

 regulation involves more than the issuing of edicts and the 

 waving of wands. The experience with corn may be reviewed 

 as an indication of some of the difficulties that beset the 

 price-fixer. 



Though the intention was to freeze merely the price of 

 corn, it was soon discovered that the corn itself had been 

 frozen. The normal rate of movement out of farmers' cribs 

 slowed down. Midwestern farmers with a watchful eye on 

 the exceptionally favorable government-guaranteed price of 

 hogs decided that they could get more for their corn by con- 

 verting it into pork than by selling at the ceiling price. 



It soon developed that not only had the corn in the farm- 

 ers' cribs been frozen, but the corn in the channels of trade 

 went into hiding. Elevators and other handlers of grain usu- 

 ally "hedge" their transactions ; that is, when they buy actual 

 corn they sell a future contract and when they sell the actual 

 corn they buy back the future contract. This operation is 

 like betting on both sides of a prize fight ; it protects the ele- 

 vator against price changes and permits it to work on a fairly 

 dependable and rather narrow operating margin. Without 

 the process of hedging, a change in the price of grain would 

 make paupers of some grain merchants and millionaires of 

 others. Because of the added risk their margins would widen. 



When the price of corn was frozen, the holders of contracts 



