WORLD'S RUBBER MARKET-

Auckland Star, Volume LVII, Issue 143, 18 June 1926, Page 10

WORLD'S RUBBER MARKET-

THE STEVENSON SCHEME.

LATEST MODIFICATION.

The operations of the Stevenson restriction scheme in regard to put of rubber have been subsstantially modified according to a recent announcement of the Colonial Office. The official announcement embodies the following

(a) The percentage of standard production which may be exported at the minimum rate of duty from Ceylon and Malaya during the quarter beginning May 1, 1920, shall be 100. (b) The maximum limit of 5001b per acre for estates of more than 25 acres shall be abolished. (c) The maximum limit for assessment in the case of small holdings of up to 25 acres shall be raised from 3201b to 4001b per acre for mature rubber, and from 1001b to 2001b per acre for rubber in bearing but not mature. (d) Provision will be made for restriction to 80 per cent of standard production for the quarter beginning August 1, 1926, should the average price of spot rubber in the London market fall below 1/9 per lb during the quarter commencing May 1. The Pivotal Price. Commenting on the altered position, the "Financial Times" says: "To the shareholder the most important feature of the announcement is the increase in the pivotal price (generally understood as indicating the official idea of a fair minimum level) by 6d per lb, from 1/3 provided in the old regulations to the present figure of 1/9. Similarly, the fact that steps have been taken to 'cut' the exportable allowance by 20 per cent should the average quotation of the commodity dip below the basic price is also a distinct departure from the previous regulations, under which the maximum change in the exportable allowance during any quarterly period was restricted to ten per cent. As the small releases of the original scheme have generally been regarded as one of its chief defects, the latest amendment should be welcomed as a distinct step in the direction of elasticity in conforming supplies to requirements.

"In arriving at 1/9 per lb as a fair price for rubber, after having previously fixed upon a level of 1/3, the Colonial Office has undoubtedly laid itself open to criticism on the part of the manufacturing interests; but from the standpoint of the plantation shareholder the outlook has been considerably strengthened by this decision. Obviously the plantation industry has' now assumed such substantial proportions that it is in the national interest for the large amount of British capital invested therein —probably well in excess of £250,000,000 at current values—to continue to earn good dividends, and the Government evidently intends to use its power in order to achieve this object. A Ten Per Cent Return at 1/9. "Weighing up all the factors in the presents situation, it is clear that nothing short of a world-wide retrogression in trade can permanently depress rubber to an unreasonable level, and 1/9 per lb can therefore be taken as a minimum average so long as the existing regularemain in force. While this price is a good deal lower than the rates recently ruling, it should prove an entirely satisfactory level both for producers and consumers. In the case of the good-class producers it represents a profit margin of around 1/ per lb, allowing a return in earnings on the basis of current share quotations of around 12J per cent. Under these conditions holders of the best class shares can. reasonably anticipate a minimum dividend return of 10 per cent on their investments—an exceedingly attractive rate for a 'protected' industry, especially when all the possibilities of the [future are taken into consideration Consequently there is every justification in recommending purchasers of suitably selected shares both for immediate dividends and ultimate capital I appreciation.