The Topic of the Week

Timaru Herald, Volume CXXXVII, Issue 19626, 21 October 1933, Page 12

The Topic of the Week

Why Raise the Price of Wheat I

u Keystone Upon Which the Future Prosperity of the World Depends ”

(By F. E. Murphy, leading Grain Expert and American Representative at the World Wheat Conference.)

Wheat, the most valuable of all cereal grasses, whose grain furnishes the flour for our daily bread, and whose production is therefore of supreme importance to the world at large, has lately evoked universal attention.

When the representatives of 32 countries met in conference in London in August, an agreement was signed to limit supplies for two years, and, among other points, to discourage any extension of the areas of wheat already sown.

This agreement involved the four big exporting countries —Argentina, the United States, Canada, and Australia —and the European countries. The vital question which remained for decision when the Conference met at its last session was that of the international price level which is to be reached and maintained for a period of four months before the question of tariff reduction is to be considered by the importing countries. The agreement provides that the exporting countries accept the price of 62.02 gold cents a bushel as the international price for the year 1933-34. This means about 3s 6d. a bushel in British currency. The price of wheat at the time of the Conference (according to the system of calculation fixed by the agreement) is from 53 to 54 gold cents, so that wheat prices must rise nearly 20 per cent before the importing countries are required to adjust their barriers. Curtailing World supplies. For the year 1933-34 the export maximum allocated between the exporting countries will be 560,000,000 bushels, and for the year 1934-35 these countries, with the exception of Russia and the Danubian States, will reduce their export by 15 per cent. On the proposal of Dr Laur, of Switzerland, who had presided at the meeting of the importing countries which preceded the final Conference, an addition to the draft agreement was adopted by the Conference which defined the intention of the agreement as being that Importing countries will not take advantage of a voluntary reduction of exports on the part of the exporting countries by developing their domestic policies in such a way as to frustrate the efforts which the exporting countries are making in the common interest to restore the price of wheat to a remunerative level. A copy of the agreement is to be deposited with the League of Nations at Geneva. Involved Some Sacrifice. The countries who did not sign the agreement at the close of the Conference were Portugal, Denmark, Estonia, Latvia, Finland, the Netherlands, and Lithuania, but all expect to ratify the arrangement. The Russian representative stated that his Government was considering the question of ratifying the agreement, if due allowance was made for Russia’s essential requirements.

It was learned that after the signing of the agreement Mr. Bennett said the Conference had taken a step which he believed would do much to overcome the universal economic depression. “This agreement,” he said, “requiring co-operation on the part of every nation concerned, has involved some sacrifice by each for the good of all. Canada as a chief exporting is happy to make its sacrifice and join with her sister nations in this far-reaching programme. We confidently believe that we have found the only sdlution which would prove a powerful, if not decisive, factor in restoring world prosperity.” Importing Countries Agree. By the agreement the importing countries undertake—(l) That they will not encourage any increase in the domestic production of wheat; (2) That they will endeavour to increase the consumption of wheat and encourage a high-quality loaf; (3) That they will adjust their tariffs when the international price of wheat reaches and maintains the agreed level for four months; and that (4) They will also modify other to wheat importation. Keystone of Prosperity. “I believe,” says Mr. Murphy, “this decision is likely to prove of inestimable value, for I feel convinced that wheat is not only responsible for the depression in industrial and financial circles to-day, but is actually the keystone upon which the future prosperity of the world depends.” "Perhaps a few hard facts and figures will demonstrate beyond the slightest shadow of doubt why I believe this is so. The present low price of wheat is solely due to an enormous surplus which has slowly been accumulating in the world’s granaries and has been glutting the market for the last five years. World Wheat Surplus. “During and immediately following the war, there was naturally a great demand for wheat. From an area of 46,000,000 acres, the United States of America increased the amount to 71,000,000. Canada, from a pre-war acreage of 10,000,000 sowed 27,000,000 acres. Just as wheat production fluctuates, so does all commercial, industrial, and financial work progress or wane. “In 1928, and just prior to it, warning clouds began to gather, for the world’s wheat output grew so big that supply exceeded demand by 950,000,000 bushels. In 1930 the importing countries of Europe alone increased their production by 300,000,000 bushels, and the excess world production was 600,000,000 bushels. Since then, however, production and consumption have been about equal, although even now there are some 500,000,000 bushels of excess stock to be disposed of somehow. The Blackest Cloud. “It was this great surplus, the blackest cloud in the world to-day, that faced the representatives of the nations who forgathered at Canada House, London, last month. They had to formulate a plan for the absorption of the excess stock.” "No country in the world has studied wheat and its problems more deeply than the United States, and nowhere in Great Britain or on the Continent does a better organisation for dealing with it exist. America is the greatest wheat-producing nation in the world. She had certainly forseen the present impasse, and for the last seven years had quietly been taking steps to find a way out. Scientists, doctors, farmers, industrialists, and the universities all met and discussed the problem in all its aspects. "Why should America have taken the question so very much to heart? My reply to this will, I hope, not only provide the answer to the present economic stagnation, but will clear away any doubt there may be in the minds of farmers regarding the wisdom of the Wheat Agreement, and show the man in the street wthy the purchasing

power of his hardly won wages has been brought down, and why so many unemployed men owe their unfortunate condition solely to wheat. Why Prices Must Rise: "In America,” Mr. Murphy pointed out, “the price of wheat governs the price of all farm commodities, and in turn the country’s agricultural products as a whole govern to a very great extent the national income. If the country produces too much, it cannot sell. Money cannot be earned, and therefore the people have not got it to spend. And so the wheels of trade slow down. It is no good the farmer thinking that he can raise more money by growing more wheat, because the more he grows the lower falls the price. Effect of Dead Market. “A recent experience of mine will serve to indicate the repercussions which have taken place owing to the over-production of wheat. After the close of the London Economic Conference I toured most of the Continental countries in order to talk with the people and explain to the best of my ability how the present-day conditions of commerce have arisen. In Vienna, noted for its beautiful petit-point handbags, inquiry showed that America was the chief customer. She is buying very little to-day, It was told, and so there was distress in this industry, which normally gives employment for 8,000 hands. In Venice I heard the same doleful tale: America, who use to buy 98 per cent, of the output of lace, is now, virtually speaking, a dead market. Every shopkeeper, merchant, and manufacturer when asked why trade was bad invariably replied that he did not know. To each of them I explained how it comes about that wheat, the easiest thing in the world to grow, is not being converted into cash at a workable profit, that there is consequently little money for luxuries in the possession not only of the farmer but of all the people who are dependent upon his prosperity. Mixed Grain Preferred. Farmers who still do not see why it is necessary to curtail home production of wheat might remember that 85 to 100 per cent, of domestic grain is unmixed in certain countries. Consumption will be greater if it is made more palatable. And if some of the restrictions were removed increased consumption would follow naturally. Experts state that if all wheat-grow-ing countries would cut acreage by 15 per cent., this depressing cloud .would vanish in a year. That this is appreciated by the four chief exporting and producing countries—the Argentine, Canada, the United States of America and Australia, who between them provide 45 per cent, of the world's supply—is shown by the fact that they have now agreed to curtail this year’s exports and next year’s production by 15 per cent. When the world sees that the cure is effective, it is hoped that the price of wheat will gradually improve.