COMMERCIAL INTELLIGENCE.

New Zealand Journal of Agriculture, Volume IX, Issue 3, 21 September 1914, Page 210

COMMERCIAL INTELLIGENCE.

THE FIBRE-MARKET.

Relation of Phormium to some Rival Products.

The High Commissioner for New Zealand, the Hon. T. Mackenzie, has furnished, the following interesting report on the fibre-market to the Prime Minister, the Right Hon. W. F. Massey, P.C. :

On receipt of your memorandum of the 6th April, on the subject of the effect of the competition of German East African sisal hemp on New Zealand phormium in the Home market, I asked the Produce Department to go into the whole, matter, and' have now the honour to submit herewith the following report containing the information that has been. gathered. The causes of the unsatisfactory state of the market for our hemp have been gone fully into, and I trust that the endeavours to throw light on the position will help producers in New Zealand to successfully meet the situation.

In my annual report for 1913 I drew special attention to the increasing exports of ' German East African sisal, and . pointed out that the whole business was a remarkable record of progress, and bore testimony to German thoroughness and enterprise. The sisal-plant was introduced from Central'America about seventeen years ago. It attains full growth in East Africa in about seven years, the first leaves being ready for cutting after three years’ growth.

As was previously indicated; the majority of this fibre goes into consumption on the Continent and America. The hemp is . shipped to Hamburg by a line of steamers which is subsidized by the German Government, and its sale is largely in the hands of one firm of merchants in that city, which employs two brokers for the purpose. On arrival the hemp is .examined by the brokers, who issue quality reports to their clients,- and business is then negotiated. The system savours of a monopoly, but it has been successfully maintained up to present. I understand that one of. the chief gievances of buyers of German, sisal is that when purchasing for forward shipment they get no guarantee from Hamburg that the hemp will be shipped within a specified time, and are obliged to accept delivery when it suits the plantation-owners to deliver. Notwithstanding minor drawbacks of. this nature there is no doubt that for certain purposes the hemp has gained a firm hold amongst certain classes of consumers. It would, however, be scarcely correct to say that its position has been obtained at the expense of the New Zealand fibre. ...

Inquiries have been made amongst the trade here with a view to ascertaining whether any preference exists amongst manufacturers for German East African

sisal -hemp as against New Zealand. The general opinion seems to be that .the two fibres are rather different in character, but that sisal stands relatively higher in estimation on account of its bright colour, strength, and exceptional cleanliness. As a general rule it fetches a higher price than does New Zealand, though at one time last year quotations were down almost level with those for " high-point fair.” German sisal has not been taken up by English consumers so much as it has by manufacturers on the Continent and in America. - It is used principally for bindertwine, and in the States sisal is much preferred for this purpose. . It also possesses an advantage over New Zealand phormium in that it can be used for ropemaking, and I am informed that makers, having been able to rely on receiving sisal of a satisfactory quality, have started making a special kind of rope which they sell as “ African ” rope. It is largely used, especially on the Continent, for mixing with the better classes of manila hemp for ropes. I also understand that the German Government contracts. for ropes stipulate' for certain quantities of German East African sisal to be used in their manufacture (this provision probably being inserted in accordance with their characteristic desire to assist the industries of their own colonies). It must be admitted, therefore, that this sisal is undoubtedly becoming an important factor in the hard-fibre market. The output for the present year is estimated at 24,000 tons, and current quotations for No. 1 quality are about £1 above those, for “ Good-fair” New Zealand—namely, £27 per ton.

Generally speaking, the effect of the competition of this hemp on. New Zealand phormium is rather indirect that direct, and does not solely account for the present unsatisfactory state, of the New-Zealand-hemp market: other causes must be sought for. ~

The price of manila is, of course, the factor which chiefly affects the New Zealand article, and although present prices of. phormium are lower than those of last year, ■ they compare favourably with the average range of quotations for the preceding four years. The causes contributing to the falling-off in manila prices since the early part of 1913 were dealt with in my last annual report, but they may be briefly, recapitulated here. Towards the latter end of 1912, owing to the reports of the damage done to the manila-hemp plantations by typhoons, &c., a big demand set in . from speculators and consumers, which caused prices to rise considerably. New Zealand prices rose in sympathy, and millers in the Dominion largely increased their production. At the beginning of the year 1913 it was thought that the manila' crop would be short to the extent of about 40 per cent., and the continuance of high prices was counted on by a large number in the trade. As time went on, however, consumers were observed to be keeping off the market, and this absence of demand caused prices to gradually fall away, New Zealand quotations moving in sympathy. As it turned out, consumers must have laid in sufficient stock to enable them to keep off the market, except for hand-to-mouth purchases, and in addition to this they found that German East African and Mexican sisal were relatively better value than either Manila or New Zealand hemp at the prices then being asked. The production of Mexican sisal for 1913 reached record figures, being 875,997 bales, as against 855,366 bales in 1912, and 713,008 for the previous year, and owing to the Mexican, difficulty the Americans obtained supplies of this fibre at comparatively low prices.

Here it will be profitable to consider the position in regard to Mexican sisal, which is recognized as a strong competitor with New Zealand hemp. Practically the whole output from Yucatan is taken by two or three firms in the States the International Harvester. Company and the Plymouth Cordage Company being the chief. The former alone absorb close on 600,000 bales, while the latter also take a large amount, leaving very little for others. As I have previously pointed out, the quantity coming to Europe in 1913 was only 8,619 bales, or less than 1 per cent. These two firms practically command the binder-twine industry. There are now two large American-owned mills in Europe—one in Germany and one in France —with an output between them of from 15,000 to 20,000 tons of twine. Of course, there are several other firms both in. this country and on the Continent who also produce a certain amount of twine, principally using New Zealand phormium for the purpose.

You will remember that some time ago I reported to you the details of the Mexican: Government’s valorization scheme, which was designed to assist the producers to stand up against the efforts of.the American trusts to depress prices. Since this came into force, however, political affairs in that country have been going from bad to worse, and although it cannot be ascertained definitely whether

the scheme has been thrown over or not, from the great difficulty the Government have experienced in obtaining money for any purpose whatever it must have become a dead-letter long ago. At the present time the quotation, is down to about 51 cents, equal to, say, 10s. per ton c.i.f. Europe, but this quotation must be regarded as a more or less fictitious one, in. view of exchange fluctuations. The producers are no doubt extremely anxious to convert their stocks into money, and, as pointed out in recent produce cablegrams, shippers have evidently been using all their endeavours to get their hemp away. Shipments for the first four months of this year total 382,398 bales, as against 199,172 bales last year, while stocks on hand in. progress at the beginning of May were only 40,957 bales, against 127,009 bales at the same time last year.

If the political troubles are not settled, and war breaks out, the probable result is that shipments will be held up, which would undoubtedly have the effect of raising prices, and all fibres should then, benefit to a greater or less extent. In some quarters it is thought that the United States houses have foreseen, this, and have laid in. sufficient stocks to meet their requirements for this season; but against this may be set the certainty that-with the excellent prospects for growing crops of wheat, oats, rye, and barley there will be an enormous demand for bindertwine, which will in. itself afford a good market for the fibre. I understand also that the use of the binder for rice and maize is extending in the States.

The following figures of the exports of binder-twine from the United States have been supplied to me from a reliable source : they furnish some explanation of the enormous shipments from Yucatan, and indicate that the great volume of these is probably due to actual manufacturing requirements :

The production of Mexican sisal for the present year is estimated to reach 1,000,000 bales. Bearing in mind that the average weight per bale is about 4 cwt., it will be found that the total weight will exceed the total production of manila hemp.

In Java, too, sisal-production is going ahead rapidly. The exports from there last year were about 10,000 tons, while this year they are expected to reach about 14,000 tons. This fibre approximates to the German East African variety, and the Dutch have somewhat similar shipping and selling arrangementsall consignments going direct to Amsterdam, business being done from there.

Summing up the position, therefore, it will be found that the two principal causes of the unsatisfactory state of the New Zealand market are : (1) The steady decline in prices for manila hemp ; and (2) the increase in production of sisal — principally Mexican, but also to a certain extent German East African and Javan.

A few general observations for the consideration of producers in New Zealand may be here submitted :

Constant touch is maintained by the Produce Section of my Department with the hemp-market here, and on all sides complaints are heard as to the unsatisfactory methods adopted by shippers in the Dominion in disposing of their hemp. The chief cause of dissatisfaction is that they will not follow the market, and fail to meet the demand. This tendency, although not unknown a few years ago, seems to become more emphasized as time goes on. The conditions of trade here are such that merchants and dealers in this country finance practically 95 per cent, of the ropemakers in Europe. Spinners are in. the position of having to make contracts for twine months ahead, and in large quantities, reaching often to as much as 2,000 or 3,000 tons; The spinners naturally have to protect themselves, and consequently merchants are compelled to make contracts guaranteeing deliveries of hemp over long periods, which is, of course, most speculative. It was this speculative demand; which formerly helped New Zealand hemp considerably : firms were willing to take risks when it was possible to obtain fairly large quantities from shippers in the Dominion.

It was previously an easy matter for merchants here to accumulate purchases of phormium to the extent of 5,000 or 6,000 tons, and New Zealand hemp was an article always being dealt with and discussed on Mincing Lake Market. For some time past, however, shippers have adopted different tactics. Instead of

recognizing' that their fibre is only of value to spinners here if obtainable at a competitive price they seemed to hold off, under the impression that some special value attaches to it as compared with other fibres; and 1 that it should therefore command a premium. From what has been stated above it will be seen that competition of other sorts has become very keen, and I am convinced that this will have to be recognized by our people if they desire.improvement. Time after time experiences of merchants here with houses in the Dominion have been brought under the notice of my Department. A spinner gives an order to his broker for, say, 50 tons of New Zealand hemp, offers are cabled out by the broker to the shipper, and after an-exchange of cables the order is executed. The broker learns he can do more business on the same basis, and suggests duplicating the order. Finding, however, that the shipper is not willing-to sell any more, and that despite further cabling nothing will induce him to do so, except at a probably considerably increased price, the broker retires in. disgust. This is said to be a common experience. Spinners get tired of it, and they turn "away on. to other fibres. Special inquiry has been made on this point. I am given to understand that with a little adjustment of their machinery manufacturers can change from phormium to sisal, for instance, and when once the change is made it is a difficult matter to induce them to go back again. It is this kind of thing that has given other fibres their opportunity, for it is nearly always possible to secure supplies of-German East African : contracts for twelve months ahead are not unknown. There has recently'been- an increase in ' consignment business from New Zealand — owing no doubt to the adoption of methods above referred to— but, as can be readily understood, these consignments have met with opposition from brokers here, and low prices have had to be accepted, which must have resulted in serious loss to shippers. Instances have been given in. which reasonable offers have been refused in New Zealand, and shippers have consigned, with the result that the parcels have fetched from £1 to £3. less per ton than' they would have done had they been sold forward in order to meet-the demand. This is another of the reasons put forward for the present unsatisfactory state of affairs.-

Before leaving this matter there are two suggestions that may help to make for improving marketing conditions in connection with New Zealand hemp. These are, — ■ • • '

(i.) That particulars be regularly furnished to me by cable regarding production in the Dominion, the amount of hemp graded each month and ready for shipment, and also the estimated amount of production for, say, . each "quarter ahead. These details would give both ' merchants and manufacturers useful information as to what, extent they could undertake trade commitments.

(2.) That every month statistics be furnished of quantities exported to (a) Europe, (&) American, ports, and (c) Australia. This would give dealers an idea of movements in competing centres, and would tend to stabalize values. •

A matter of considerable interest to hemp-millers in the Dominion is that the United States Government has recently passed an Act directing that manila hemp shall be graded on and after the xst January next. It is thought that this step may recover some of the ground that has undoubtedly been lost by manila during the past few .years. It will be interesting to note what effect the new law has on the fibre-market as a whole, but from the point of view of New Zealand I think that the influence will not be too favourable. I think that, owing to the difficulty of getting regular lines of manila in the past, certain firms who required a given standard of hemp have perhaps preferred to take New Zealand, as owing to our grading system they could rely on getting the required quality. The new system will naturally give them a better guarantee of obtaining what they want, and to this extent New Zealand may suffer. However, this point is a moot one, and some here seem to think that the new move has come some years too late. Of course, there is the possibility that an improvement ’in quality will result, in an increase in manila prices, and should this happen New Zealand fibre should benefit in turn. . •

I trust this report will be of use to millers and producers in, the Dominion. I am convinced that if shippers will give the points I have raised serious consideration,, and act on their conclusions, the result will be to the betterment of the industry, as a whole. ' . .

Year. Quantity. Tons. Year. . Quantity. Tons. 1901 .. 15 ' 1908 .. ’ .. 4,000 1902 ,. . . . . 225 • 1909 t 4,800 1903 • ■ 350 1910 .. . . 7,000 1904 .. 800 1911 ' .. 10,000 1905 I , 400 1912 .. 16,000 1906 1,600 1913 •• 21,500 1907 ... ... 3 OOO

The following figures show the production since the cultivation was commenced: —

For the nine months ending — lb. Value. 8 31st March, 1914 .. 83,082,291 7,198,713 31st March, 1913 . . •.. 80,535,186 5,767,400 31st March, 1912 - . . 81,215,085 5,296,170