WORLD’S WHEAT SUPPLIES

Taranaki Daily News, 16 April 1932, Page 23 (Supplement)

WORLD’S WHEAT SUPPLIES

SHORTAGE FOR THIS YEAR demand on stocks anticipated. IArPLIUAL CX72SIIMTT TEE’S SURVEY. The 20th report.of tho Imperial Ectonomie Committee deals, with wheat. It ia a survey, without’ recommendations, of the wheat situation throughout the world in 1931. The committee set itself in particular to find out whether there has been over-production of wheat, whether requirements are likely to increase, and what the prospects of prices are likely to be. . The report shows that in the yeans since the close of the war the quantity of wheat grown has greatly increased. Before the war there was, on an average aft annual expansion of' 53,000,000 bushels, and just before the war the world’s annual crop was about 3,000,000,000 bushels, leaving out Russia and China. This production dropped sharply in the war by something over 100,000,000 bushels a year. There was a big drop in European countries, which had produced before the war nearly half the world’s wheat and which diminished their output by a third. They were producing 400,000,000 bushels less in 1920 than in 1013. On the other hand, the wheat countries outside Europe, Canada Argentine, United States, Australia a.nd’ India, under the stimulus of wartime demand, were producing 300 million bushels more, so ' that the net decline was only 100 million bushels. In the years since the war Europe hgs regained her old output. The five non-Euro-pean wheat countries have continued to increase and now produce 2,000,000,000 bushels where before the war they produced 1,500,000,000 bushels. - Production has increased steadily. Prices during the same period hav.e fallen steadily. In an era when there is widespread unemployment and privation there is a superabundance of the world’s primary foodstuff, at prices which, over, a vast area of wheat-grow-ing land, do not repay the cost of production. Prices began to fall in 1920, and fell at first more rapidly for wheat than for the run of other commodities. In 1930 wheat was selling for about twofifths of what it had fetched in 1920, but the big drop had come between 1920 and 1923, and prices in 1930 were. in creneral. about .three-quarters of . the prices in 1923. On the whole, in the last ten years, the fall in tho price of wheat has followed the general trend of declining prices so closely that it is plain that general causes rather than causes special to wheat have been at work. That it is these larger economic and monetary influences which have kept the price of wheat declining, rather than excessive production, is brought out by a striking diagram in the report which shows that wheat production, for all the strides it has made since the war, has not yet reached the level it would have reached if the pre-war rate of increase had been continued. The setback to production between 1914-1917 was 60 severe that recovery has necessarily been slow. SPECIAL CAUSE'S ALSO AT WORK.

But special factors told against wheat after 1029. The United States Federal Farm Board held a huge and growing visible surplus stock —450,600,000 bushels in July .1931—which it kept off the market in the hope of helping tho price. The mere existence of this stock had a depressing effect. Russia reappeared as an exporter of wheat on a large sftalo. Butj the main reasons why a smaller crop in 1029 was followed not by a rise but a continued fall in price must bo sought in the general economic condition 7 of the world. ' Nevertheless tho stocks liavo accumulated and to-day are double what they •were 10 years ago. They cannot be measured very closely- because ho much wheat is in the hands of farmers and millers, but the known existence of huge supplies depresses prices. Consumption is not very easily measured, but some conclusions are established. In the first place, tho world demand for wheat is increasing in consequence of the grohvth of population. The consumption per head is increasing in Russia, the Orient and. tropical countries. The reporLquotes tho conclusion of the Food Research Bureau of Leland Stamford University, that tropical countries show an-' increase in consumption not only absolutely, because of increased population, but also per head. There are more people and each person is eating more wheat.

In more civilised countries lees wheat is being eaten for bread, as fruit, vegetables, dairy produce and sugar have become more important in the daily diet. The American who used 30 years ago to eat 5.4 bushels now eats only 4.2 bushels; but there has not been any great drop since the war either in the United States or elsewhere. The demand for wheat for human food is inelastic in the chief wheat consuming countries, and abundance means a fall in price. But per head consumption includes the wheat a man buys to give his hens or other livestock or to u/se for industrial purposes. THE SELE-SUiFFICttENT POLICY. The great importing countries, , and especially the free market of Great Britain, acted as shock absorbers and stabilised prices by accumulating stocks in cheap times and drawing on them in years of poor harvests. The new policy, both in Great Britain, and Germany, of becoming more self-sufficing will lessen the steadying effect of these buyers, and world prices will probably fluctuate more. An energetic campaign has been started in the United States to feed livestock with cheap wheat, and this movement may assume large proportions. Taking a long view, wheat, while it has shared the ups and downs of the last eighty years, has lost ground com*'pared to other commodities, and has shown a steady tendency to fall in price. The purchasing power of wheat over other commodities has declined by about 4 per cent. Yet its cultivation has progressively extended, because the costs of production have fallen as well. Biological and engineering and transport advances have all cheapened production. Are these costs of production likely to decline still further in the countries from which severest competition is likely to be felt? The reaper, the binder, the harvester-thresher, and the tractor have steadily cheapened production, and the last two have had an enormous effect in the post-war yean-. Whereas in 1916 there were only 30,000 tractors in'the United States, 850,000 were in use by 1925. There were 270 combined harvester-threshers in the United States in 191-1. In 1029 there were 37,000. The American exports of that machine rose from 1700 in 1925 to nearly 11,000 in 1929. (There was a. setback to 0500 in 1930 owing to the slump and the poverty of the farmers.) In Western Canada there were only two in use in 1922, but 7255 in use in 1929. Through mechanised farming remarkable, economies accrue to individual farmers, who have often halved the loss per bushel, ■and who are freed from the need.to pay high prices for seasonal labour. MORE PRODUCTION, LESS LABOUR. There is n rise in production per head, and a. decline in the. volume of

agricultural employment. It is the day of the large farm unit. Another important consequence of mechanisation 'combined with selective breeding of wheat, is greatly to extend the wheat area and to enable wheat to be grown on. poor land. The,general conclusion follows that, while population is not expanding rapidly, wheat is being produced more and more cheaply in ever greater quantities, and the outlook is one of continuing struggle between . farmers who can adopt the new technique and those who fail to do so, and. of fierce competition involving low prices. The technical. revolution sets a problem for European statesmen anxious to protect their agriculturalists, and to maintain a balance between the urban and rural elements in the national life. By 1931 only three importing countries —the United Kingdom, Irish Free State ■and Denmark —allowed wheat to enter ■without-any duties or-quotas. Throughout Europe duties and quotas ha. . been continually stiffened m the last seven years, in order to protect home production. Quota legislation exists in Germany, France,. Italy, Holland, Sweden, ■Ozecho-Slovakia, Greece and Latvia. In France the quota for domestic wheat is 97 per cent. The result of quota and ■similar legislation (e.g., State grain monopoly) has been to raise prices above ■the world prices in a free market. In ■France and Germany there was a sharp upward rise of prices in 1930 and 1931, ■and prices for wheat in Franco were ■nearly double the prices in England. COMPETITION IN BRITAIN. The general policy of European countries of protecting home production ■made competition in the only large free market left, Great Britain, unusually keen and contributed to the steady fall •in prices. The European countries which ■have a surplus of wheat, the countries ■of the Danube basin, have found themselves confronted with the technical revolution in wheat growing, which makes very large farms the profitable unit, just when agrarian reform has brought about a great subdivision of estates into peasant holdings. So that in these countries, too, statesmen have had to protect the local grower in his own homo market, even though little could be done to maintain the price for exported ■wheat. The United States, through the Federal Farm Board set up in 1929, has also raised prices inside the United ■States above world prices, by buying wheat at a fixed price and removing It from the market. While at first the action of the board helped io assist ■the decline in prices, the large surplus it came to hold soon had a vety depressing influence. The data in regard to post-war Russia is scanty and inaccurate. The average pre-war production was 758 million •bushels. The crop which had shrunk tremendously during the war years and early years of the revolution, was only some 419 million bushels in 1023. By 1925, however, it was 782 million bushels, and by 1930 over 1,000 million bushels. Small crops and tho break up of large estates, together with increased consumption at home and resistance by peasants unwilling to grow quantities of wheat for export without adequate return, delayed Russia’s reappearance in world markets. EFFFECT OF FIVE YEAR PLAN! The Five Year .Plan, with its State farms, and collective farms, is hastening the extension of machinery. The increase in production is very large—--383 million bushels in the exceptional year 1930—but there is no way of judging.how much will be exported. Russia can sell below tho costs of production, but it is not in her economic interests to do so for longer than she can help, and the low price of wheat is as serious a matter for Russia ns for any other exporter. Russia exports primary 1 products and imports machinery and equipment. ’Low prices for her chief export increase the sacrifice demanded of the present to tho future by delaying the coining of industrial equipment. An old and formidable competitor fias reappeared in the wheat trade and the need of the present Soviet authorities for foreign currency introduces new and un- ’ certain factors into an already complicated market. THE WORLD OUTLOOK. At tho end of tho last crop year, 1930-31, it was plain, according to tho figures of the International Institute of Agriculture, that tho total North American crop would bo 79 million bushels smaller than the previous year. Apart from the uncertainty introduced by Russia, this smaller crop would lead to au improvement in price. Uncertainty as to Russia contributes greatly to instability of price. More exact information is needed, 'but the Empire Marketing Board has made a beginning towards filling this gap. There are clear signs that the exportable surplus from Russia is smaller this year. For 1931-32 world production is smaller, and is on the whole insufficient to cover the requirements of consumption. Tho European demand is likely to be larger because of poor rye crops. Stocks will have to be drawn upon, to tho extent of something like 180 million bushels. But hope for better prices must rest at least as much on a general recovery from the depression as on any restriction of the production of wheat.