The Press. Friday, December 15 1916. State Action and Wheat Prices.

Press, Volume LII, Issue 15774, 15 December 1916, Page 6

The Press. Friday, December 15 1916. State Action and Wheat Prices.

Now that the propofal of selling the New Zealand wheat crop to the Government is being considered, it may be of interest to state briefly the reasons which led the British Government to undertake control of the wheat supplies. and what followed upon their action. Curiously enough the result was an immediate rise in prices to a higher level than wheat had touched since the Napoleonic wars, although whether there is any connexion oetween the two facts is a doubtful point. The matter is very clearly dealt with in an article in the London "Spectator" of November 4th, which arfived by yesterday's mail. It appears from this iiiat the English Board of Trade very wisely from the outset took the view that the essential problem was not tho reduction of pricc but the maintenance of supply. About a year ago tho Government realised the importance, as a matter of national defence, of having a reserve of wheat in the country, and took steps with the full knowledge of tho corn trade to make such provision.

Tho actual amount of the reserve has not been made public. It was never intended to be very large, and the trade tras informed of the amount to bo purchased, and was assured that the Government would not use this hoard to knock down the market arbitrarily . Unthinking persons, who clamour against "speculators" as if they were sworn enemies of the country, may wonder why the Government took the trade into their confidence. It is because they realised that the muchmaligned speculators really perform valuable service to tho country. The important point, as has been stated, was to secure an adequate supply for tho feeding of tho people, and it is certain that a merchant will not risk his fortune in importing wheat unless he thinks, he sees his way to making a profit out of the transaction. Obviously it was the policy of the Government at that time not to drive private dealers out of the importing trade, unless they wished to see famine threatening the land. j-ioweve.r, in spite of the assurances given, and in. spite of the fact that the British Government stopped buying as soon as they had got their reserve, the very fact that this reserve existed, ac-' cording to the "Spectator," terrorised a section of the market. At the same time rumours of the possible opening of tho Dardanelles, or of the possible conquest of Bulgaria, frightened dealers in Avheat and made them hesitate to speculate heavily. The result of these various causes was that in June and July last wheat in North America dropped to a comparatively low price. It would, of course, have been to the interest of Great Britain as a whole to buy as much of this cheap wheat as possible, and tonnage had actually been reserved for carrying it; but tho Government could not buy because they were pledged to the trade to limit their purchases, and the trade would not buy, because they were afraid for the reasons already stated. It even became necessary to liberate tonnage which had been reserved for the wheat trade and allow shipowners to load up with other things for Britain or for her Allies. If this situation had continued England might have really run short of a supply of wheat. Then it was that the British Government. in order to avert the threatened calamity, decidcd to go more heavily into tho wheat business and to undertake the responsibility for keeping the country supplied. One of the steps .taken was tho purchase from tho Australian Government of. the largo stock of wheat which Mr Hughes had previously bought from the Australian farmers.. Mr Hughes, as the "Spectator remarks, had long been anxious to sell this wheat, but the policy pursued by the Australian Govecinicnt in commandeering ships at unprofitable freights had frightened independent shipowners away from Australia, with I tho result that tho wheat had been left on his hands. Tho Homo Government-, which has dealt more tactfully with the shipping trade, was - able to help him out of his difficulty. The whole story is illustrative of the difficulties which beset any Government which attempts to override economic laws. Our own Government has already got into trouble through attempting to regulate the price of wheat, and may easily get into another even worse scrape if it is not very careful. So far as Great Britain is concerned there is still a serious possibility, as the '"Spectator" remarks, that '-the new , " Government organisation for wheat | " purchase, however encrgetic and '• patriotic its members may be. will not j •' be ablo to secure such good results as " a multitude of private traders com- " peting with one another for the | " chance of a high profit."