COMMERCIAL & FINANCIAL

Evening Post, Volume XCIII, Issue 27, 31 January 1917, Page 4

COMMERCIAL & FINANCIAL

Evening Post, Wednesday. The curious financial, position which has arisen in India and Coylon, and which resulted in the suspension of tlio tea and other sales (not yet resumed) is made clear in tho following ■ statement by Harrison, Ramsay, Ltd., to their Wellington branch:—The rate afc which banks in India (and Ceylon) buy bills on London is ruled by tho rate at which banks can recover their money from London, either through (1) the sale of their bills or telegraph transfers on London; (2) by the purchase in London of. the Secretary of State's council, bills on India. In tho ordinary course of events the Secretary of State puts up for tender in London every week council bills or telegraph transfers for an amount which lately has varied from 30 to 50 lacs of rupees, and is prepared to sell what is known as "extra councils" over and above this allotment to an unlimited amount at an enhanced rate as required by tho banks. So long as the banks can rely upon getting extra councils at si rate, they arc in a position to buy bills practically to an unlimited amount. The present impasse has arisen owing to the Secretary ot State having drawn council bills very heavily for some months past (200 to 300 lacs per week) and consequently tho Jndian Treasury is considerably depleted. Other causes for the depletion are as follows: (1) The heavy export of currency (rupees) to Mesopotamia, British East Africa, and Egypt in connection with, tho war, and which has not returned to circulation in India; (2) the abnormally heavy trade requirements in India; (3) the (eompara tivoly speaking) limited import trade into India consequent on tho war, necessitating a greater demand on council bills for returns by tho banks. The position at the moment is'caused by the Secretary ot State's inability to offer more than 80 lacs of council bills for allotment each week (and of which no more than 10 lacs may bo allotted to any one bank) and to his refusal to sell any extra council bills in tho meantime. Tho immediate result of this is that tho Eastern banks find it 1 impossible to recover their money from London against their purchases of bills on London except to a very limited extent, and therefore the banks have to Restrict their businesses and only quote rates for ono day, i.e., bills cannot be sold for "forward delivery."

The- position is so acute and of such vast importance to tho trade,of India that a remedy will undoubtedly bo found very shortly, possibly through: (1) The release of the Government gold reserve in India; (2) by the immediate issuo of paper currency in the form of notes, and perhaps of notes of as loiv a denomination as ono. rupee; (3) by legislation reducing tho amount of silver reserve which it is necessary to hold against the note issue. The immediate cause of the impasse is the actual shortage of rupee currency in India. This can bo remedied in a comparatively short time by tho coinage of rupees with as little delay as possible, but, in the meantime, business is practically at a standstill for tho simple reason that it is impossible for merchants to purchase produco (which cannot be shipped for two or threo weeks) owing to the risk they tako in doing so, in that, the rate of exchange for their bills against such produce cannot be fixed until the bills are actually ready for delivery. This risk is a very considerable one as three weeks hence (when the bills may be ready for delivery), it is quite possible exchange rates may bo considerably higher. Tho position will probably improve, very shortly, but in the meantime business must be considerably restricted. Note. —The communication is dated Colombo, 20th December, 1916.

DAIRY PRODUCE.—The price of cheese for the local market has been -reduced during the past_ few days, and brought more on a parity with the official price for export. It is understood that 9^d to 9§d is about the value of cheese for the domestic trade. Butter prices in London have receded by reason of hc^'y supplies arriving almost simultaneously from Australia and New Zealand. Sales' aro reported] by cable at ISJOs per cwt. London is paying for Canadian cheese 142s to 144s per cwt. according to the . cablegrams. The position with regard to the requisitioning of Now Zealand supplies is, as to certain details, still unsettled. Good despatch of New Zealand has been made from Wellington up to tho present, and tho-cheese in sLor* awaiting shipment is reported, to bo in excellent- condition. The Montreal Trade Bulletin, re-porting on exports of dairy produce from Montreal during the navigation season, states that for the 1914 period _ it .was 1,482,538 boxes of cheese. This was increased by 369,193 boxes in the 1915 period, and to 2,142,699 boxes all told 1- for the 1916 navigation season. Exports were almost entirely to the United Kingdom. Before tho wm exports of cheese since 1903 had shown, a decrease of 913,415 boxes from 2,395,953 boxes to 1,482,538 boxes in 1914. The war, however, has brought exports rip to 2,142,699 boxes. Before tho war the price of cheese ranged from 11 cents to 15 cents (sgd to 7id) per pound; since- tho war it has ranged from 14 cents to 25£ cents'(7d to 12§d), tho .-latter figure being made in the open Montreal market. Sep-tember-October cheese was valued on 15th December at 12gd to 12jd per pound.

HEMP.—There is a. fairly strong demand for hemp from the United States, but prices ere from £4 to £5 below London prices if the fibre^ could be shipped to that market. Shippers feel, however, that high as the market is there they cannot take the risk of selling in view of tho absence of shipping tonnage; and the prospects for -shipping to the States after the departure of a steamer now loading for there- aro not particularly bright. There may be an accumulation of stocks here with storage accommodation already fairly well taxed. F.o.b. prices in Wellington to-day, are approximately £41 per ton for good fair grade, £40 per ton for high fair,_ and £38 per ton for low fair. There ia no demand for tow.

TALLOW.—Largo accumulations of tajlow are reported at Wellington and other main ports of shipment, for want of immediate shipping space. It ia felt by somo in the trade that no tallow will bo taken before April next.

JUTE GOODS.—There has been a fall of 2a per 100 yards in the Calcutta market on hessians for early shipment to New Zealand. The difficulty of financing the juto business is boipg keenly felt in Calcutta, in common with tea and other Eastern produce.

TEA.—Privates sales of tea. are. proceeding in Colombo, but only in email quantities and shipments to Australiu and New Zealand for tho current month are about half normal_ requirements. Eoug-hly speaking, Australia and New Zealand can absorb 3j millions to 4 million pounds of Ceylon tea monthly, and at a certain period of the year stocks of Indians and Chinas are banked up, but for various reason this was not done to any important extent during 1916, so that there havo not been those accumulations to fall back upon. If, then, regular shipplies of teas aro not coming to hand as usual, it is feared by fiomo in the trade that there will be a, serious shortage, possibly 50 per cent, only of what is actually required. The financial difficulty that has arisen in India and Ceylon, to which referenco is made above, greatly accentuates tho troubles of tea importers who were already troubled by the high freights and scarcity of shipping. There has been no intimation up to tho time of writing of tho resumption of the Indian and Ceylon tea sale 3. Java tea exports to almost all markets are on iho short side.

GROCEIIIES — Californian dried fruits for February-March shipments show declines of 5 per cent on apricots and oil bleached sultanas respectively. Prunes have advanced 2s 6d por cwt; poaches, 2s per cwt. Thompson's seedless raisins are- unchanged. Nos. 2 and 3 grades of Australian dressed rice have advanced £1 per ton on the week, but No. 1 is unchanged. Stocks are generally heavy.