FINANCE AND COMMERCE

Taranaki Daily News, 31 December 1929, Page 15

FINANCE AND COMMERCE

A DIFFICULT YEAR PAST FALLING SECURITIES & MARKETS A REVIEW OF 1929. (horn Our Own Correspondent.) Wellington, Dec. 30. The moribund year will pass into history as a year of disturbed money Buckets and falling securities and commodity markets. The chief cause of the monetary disturbance was the excessive speculation on the Now York Stock Exchange. Dealings on that exchange are only margins; that is, the buyer- of shares only pays a portion of the value, the rest being financed by the selling broker, with, of course, adequate security. To finance sueh dealings brokers have had to borrow from banks and corporations to an increasing extent because of the increase in speculation. The loans granted were mainly at call, time loans forming relatively a small proportion of the total. The rates for call loans wereconsistently high, ranging from 6 per cent to 12 per cent., and occasionally going higher. These high rates of interest naturally attracted funds from all over the United States and further afield, for a great deal of money was sent from Europe. It was f ' transfer of these funds that caused an appreciation in tho dollar exchange. The demand for dollars was insistent and large, and the transfer of the funds fel. largely on tho Bunk of England, which had ultimately to export gold. Furthermore, France was in a position to draw gold from London because during tho inflation period the Hight of the franc was most noticeable. French houses transferred funds from London and New York, and when the franc was stabilised French funds were repatriated and this gave France the power to draw gold. Early in February the Bank of England was forced to raise its discount rate from 4’/ s per cent, to s’/ 2 per cent., and this was tho first discordant note. But no notice was taken of his by business men and sharebrokers, for it appeared to be assumed that it was a temporary gesture, and so in New Zealand mid Australia investors in Stock Exchange and ether securities went gaily on their way paying high and, in may eaces, fancy prices for shares and real estate, and committing themselves to many obligations. When in September the Bank of England was obliged' 4 to raise its discount rate another 1 per cent, to 6J per cent., and tho New York Federal Reserve bank raised its rediscount rate 1 per cent, to 6 per cent, tho security market received a jolt which sent values tumbling down. In New York there were heavy losses on tho Stock Exchange, and, of course, tho funds lent to brokers at call were immediately called in, and there was reflex movement in exchange. European funds that were rushed across the Atlantic to take advantage of the high rates ruling in New York were recalled by the European lenders, which resul'ed in a strong and insistent demand for sterling, with the result eventually that some of the gold sent to New York had to be returned to London, and investors on tho New York exchange have recovered sanity and a sense of value, and are operating soberly and sensibly. When the Bank of England rate went up to 6} per cent, it began to dawn upon investors ‘in the .Dominion and the Commonwealth that tho position was not so richly rose-coloured as their fancy painted it. The move astute immediately began to sell, and the selling movement gradually gained momentum and values declined. Between about tho middle of December there was a heavy decline in share values, especially bank shai-es, which investors had come to look upon as gilt-edged and even better than Government, securities.

From tho beginning of the. upward movement in money rates the commodity markets were affected, because wholesale buyers had to curtail their purchases. Dear money was a factor and not tho sole cause of the decline in values. Production has increased, and although there has been an appreciable increase of consumption in many lines output has shown a gieater increase. At the present time almost every commercial product has fallen in yaltie, and the effect of this is to cause a contraction in purchasing power.

The East is, suffering as well as the West, and Zealand and Australia as much us of more so, than Canada or South Africa. What is going to be the effect of this decline in commodity values? Producers will receive loss money, that is their incomes will bo lower; consequently they will have P's to spend, and that, again must react on tho domestic trade of tho countries affected, Thus it would appear that the trade of the whole world wilt bo within smaller conipass. There is also likely to bo an increased demand for credit, and, as it is inclined towards short supply, rates will probably go up in the producing countries. Tho conditions call for caution, caro and economy. Wasteful expenditure must bo avoided, and everyone must work harder for tho common good.

MARKETING OF CHEESE.

"STAN DAR DISED” BR AN DS.

PROSPECTS IN BRITAIN.

An important section in the report of Mr. Singleton, Director of the Dairy Division, deals wit’h the question of what is known as “standardised” cheese.

Mr. Singleton points out that there was an impression amongst certain traders in the United Kingdom that New Zealand was trying to produce a cheese of tho lower quality. Ho explained the position to many wholesalers and retailers, and it was generally considered that New Zealand had done the right thing under tho circumstances, and that provided the dairy companies would give the requisite care to the manufacture of this cheese, there was no reason why they should not establish themselves ■ in an acceptable position on the London market.

It was admitted that the trade in the United Kingdom preferred only one brand for eheddar cheese. "If, however; the manufacturers of standardised eheese devote tho necessary care and attention to the manufacture, there seems every reason to hope that the ’standardised’ will become as popular us ’full cream’ of equal quality.” It appeared that tho principal objection to the handling of the standardised cheese was the of making \

explanation to a prospective buyer aft to why the brand on the crates of “standardised” differed from that which New Zealand had hitherto been using and was still using for “full cream.” This made some traders prefer to deal with “full eream” cheese only. On the other hand some traders noted that there was an implied guarantee with the “standardised” cheese, and they wore inclined to accept them in preference to “full cream” on that account.

It may take some little time to remove the prejudice which naturally exists against the change, and which in this case means the additional brand for New Zealand cheese. It is also thought by some that the standardised cheese may not sell quite'so readily as full cream on a slow market. It is, however, generally recognised that our standardised cheeses are not, impoverished in butter-fat content, and that they will compare favourably ou chemical analysis with full cream Cheddar cheese from Now Zealand or elsewhere. MODIFIED MILK CHEESE. Remarking that New Zealand is putting on the market occasional consignments of what is known as modified milk cheese, and which really means a standardised choc c which has fallen below the legal standard, Mr. Singleton says the export of this class of cheese is confusing to traders in the United Kingdom, and it is a moot point as to whether the export of this class of elivese should not be prohibtied. WANED CHEESE.-.

Dealing at some length with the question of waxed cheese, Mr. Singleton says: New Zealand is exporting so much cheese to the United Kingdom that it is on the markets of the United Kingdom throughout the twelve months of the year. Evidence available up to the present appears to show quite conclusively that, cheese .which has been paraffin waxed will keep better in -storage than cheese which have not been so treated.

"My opinion is that the trade can take a considerable percentage - of New Zealand cheese as waxed and without causing the price of waxed cheese to fall below tho price of unwaxed. In vie.. - of the fact that there is a demand for both waxed and unwaxed, I am of the opinion that the question of whether cheese should be waxed or unwaxed should be.deft to the trade and the individual cheese - companies to decide.” Considerable quantities of New Zealand cheese are being purchased by the manufacturers of what is known as “package” cheese or "process” cheese. Various brands are on the market, anil fairly large quantities are manufactured in the United Kingdom, Canada, and United States. While this development has to some extent interfered with the consumption of chuddar cheese as such, there appears to be a good deal of opinion to tho effect that the placing of these cheese on the market has obtained new outlets which would not have been available, to eheddar cheese in its ordinary form.

1 + is stated that in districts where cheese is considered as an important article of food the preference is likely to be maintained by eheddar cheese in its usual form. It is understood that package cheese has to so re extent supplanted some of the varieties of soft cheese which were imported in the United Kingdom from the Continent. This development would appear to be in line with tho thoughts of those who desire to foster Empire trading. MULTIPLE SHOP TRADING. The trend of the period toward amalgamation of large businesses is in evidence amongst what are known as “multiple shops” in England aild “chain stores” in North America. These multiple shops in the United Kingdom are a very important factor in tho dairy produce trade. They are buyers of large quantities of New Zealand finest butter and finest and first grade cheese. When buying they will not always pay tl.o maximum price. Their heavy purchases give them a rather unique position on the market. It was stated that more recent amalgamations placed under one control shops numbering between 3900 and 4000, and which belonged to four or live companies. In addition co-operative societies embrace between 8000 and 9000 shops. It appears evident that the purchasing of New Zealand produce in the United Kingdom is to a considerable degree in strong hands. Multiple shops, it was stated, desire a standard , rieo article, and with respect to cheese what is desired is acceptable quality which can be retailed at one shilling per pound. . FOREIGN COMPETITION. It is expect rd that there will be an increased .production of dairy produce in all the countries I have visited, says Mr. Singleton. Much of this increased production will, it is believed, be used for local consumption in the country oi origin, but given profitable prices tnere will evidently bo an increased supply of both buttci and cheese to the markets of tho United Kingdom. Denmark expects to increase its output as a result of improved farming, breeding and feeding. Tho same applies to Holland, Ireland, Canada and U.S.A. It would appear that there will be plenty of conijictition in both butter and cheese on the markets of tho United Kingdom.

“It may bo stated, however, that with tho exception of a few of our lowest grading brands, tho traders in the United Kingdom and Canada speak well of tho quality of New Zealand butter. Tho mild clean flavour of New Zealand cheese is appreciated by the majority of consumers. There is a small section of tho general cheese trade which desires higher or more mature flavour, and will pay a higher price therefore than tho average price received for either Canadian or New’ Zealand cheese. A closer and firmer body in New’ Zealand cheese would doubtless cause them to bo more acceptable to traders and tend toward increased consumption. Our everincreasing volume of cheese exports causes tho question of increased consumption to bo of paramount importance to our ..cheese trade.” DAIRY MARKET. PRICES FIRMING. Tho London office of Amalgamated Dairies reports: “Our butter prices are now firm. Anchor 1645. Market firmed before holidays on steady demand. Little business passing, as buyers still absent, but anticipate a renewal of the demand next week round these prices. Danish closed at 176 s spot, now asking 178 s f.o.b. Retail unchanged. Cheese. —White 89s, coloured 87s. Market steady; little business passing. Canadian Dfis to lOOs; -market quiet; retail unchanged^' I ' \LdsU . 1 ' . W’viwsfttloH lsU ■ . uiixrsi.nl' kv.iil'-vw ;- : -k vs? •Vdl * .HUil S' U .1