Copra In The Doldrums

Factors Which Have Caused Low Prices First of Series of Articles Dealing with Position and Probable Future of Coconut Planting

BY R. W. ROBSON, EDITOR OF THE PACIFIC ISLANDS MONTHLY.

London, January 25.

When one sets out to “get a line on the future of copra,” one is faced with some peculiar difficulties.

It is not a matter simply of talking with experienced merchants, discussing the probable consumption of copra products, and trying to make an intelligent forecast of a free market. If the trouble were merely that copra and its rivals were in huge over-supply, the situation would be easily summed up. But it is far worse than that.

Apart from the facts that there is general depression and that the copra market has been invaded in enormous quantities by various oil-bearing “seeds” (as they are called here), the really complicating factors are that the world market is now dominated by Unilever, one of the most powerful combines in the world; and that a very recent development of chemical science has deprived copra of certain advantages which it formerly held over its rivals.

In the course of this short visit to London, I have called upon numerous brokers and merchants who handle oil-seeds and study the market carefully; I have had a look over the Baltic Exchange and the commercial sale rooms; and, through the kindness of these gentlemen and various friends, I have gathered a mass of information which I shall try to co-ordinate for the benefit of the thousands of men in the South Seas whose future welfare is bound up with the future of copra.

It is not possible to summarise this data, and my conclusions, in one article.

In the course of a short series, published monthly, I shall give what information I have concerning the present condition of the copra market; the character and quality of other oil-seeds which are increasingly competing with copra; the serious effect and nrobable future of the new whale-oil industry; the his tory, present effect and probable future of the Unilever combine; and what (in the opinion of the London and German observers) is likely to be the condition of the copra industry in the future.

As the last-mentioned is likely to be the last article of the series, and our readers will naturally want to know what conclusions students of the market have reached, I will say at once that it is not expected that growers will for years, if

ever, again see prices very much over £20 per ton; but that there is quite a good future for those growers who can make a profit on a price over £10 to £11 per ton f.o.b.

We know that the primary factor in the buyers’ domination of the copra market is the enormous over-production, first, of copra and, second, of several oil-seeds and oils, which are in active competition with copra. But few people in the South Seas have seen the figures. After considerable trouble I obtained figures from Germany (which specialises in these kinds of statistics) and from one or two London brokers, which enabled me to compile the following table, showing world production:

The 1930 figures, not available yet in detail, show the same upward tendency, I understand. No comment is needed —the thing speaks for itself. And this huge mass of oils and oil-bearing substances was thrown into the market just when the world, lethargic under an unprecedented economic depression, was reporting a decreased consumption of practically every commodity.

The wonder is that it has been possible to sell our copra at all, at any old price. Yet one London broker, only a few days ago, said: “While prices have been at ridiculous levels, every bit of copra that has come in has been sold. There are no great stocks of oil seeds awaiting buyers in this part of the world.” That, I think, is a very important point to remember when we come to a consideration of Unilever and the future of the market.

With regard to copra, here are some interesting figures showing shipments, in tons, from the various main producing countries of the world, in 1920 and 1929, as shown in the fine “Review” issued by Prank Fehr and Co.:

Those figures, be it noted, do not include South Seas production. As a matter of fact—but I do not know why—none of the various compilations I gathered up in London and Germany take South Seas copra into their calculations. In one place. I saw it vaguely referred to as “about 140,000 tons per annum.” I believe it is a good

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1925-26 1928-29 Tons Tons Copra . 625,751 910.908 Palm-kernels 487,796 458,907 Ground-nuts (Peanuts) . 1,250,918 1,375,799 Soya Beans . 1,683,384 2,588,574 Linseed . 1,473.325 2.034,525 Whale-oil (Barrels) . 1,044,272 1,861.877

Philippines 1920 32,148 1929 178,018 Java 42,638 52,888 Macassar 49.523 92.869 Padang, Sangir. etc. .. . 34,399 138.000* Other Dutch E.I 109,600* 186,112 Straits Settlements .. 112.430 Cevlon 68.044 101,453 Malabar 1,470 — Total 340.652 858.340 •Estimated.

the world supply of copra, now put it at over 1,000,000 tons annually; so evidently the South Seas product comes into their calculations somewhere.

It is clear that in 10 years, copra production has much more than doubled.

Now let us glance at copra’s more formidable rivals.

Soya Beans.

The soya bean, though one of the plants extensively cultivated in the Far East since the dawn of history, did not appear in London, as a source of vegetable oil, until about 1911. Then it came rapidly into favour, not so much on account of its oil content (which is only 15 per cent.), but because of the very high protein content of the soya bean oil-cake, which made it valuable for many purposes. But even its low percentage yield of oil represents, now that over 2,500.000 tons per annum of beans are shipped out of the East, 375,000 tons of oil in the bulk —quite sufficient to affect the world’s vegetable oil market. For soap and margarine making, it is a rival of copra.

More than a quarter of the area under cultivation in Manchuria is devoted to the soya bean, and most of the shipments are from Dairen and Vladivostock, though it is also grown in South China, India, Japan and South Africa. Before the war, and before the merits of soya bean meal had been recognised, the average value of the bean was £7/10/- per ton. In 1924- 25 it was about £13 per ton, and it remained in the vicinity of £11/15/until the end of 1929. Then came an enormous increase in shipments, with the result that the market, encountering over-supply plus depression, has declined to £6. This has been followed by a sharp decline in shipments from China; but it is reported that the Eastern crushers are working full time on the low-priced beans, and that the shipments to Europe of the oil, instead of the whole bean, have increased.

Ground Nuts (Peanuts).

The world production of ground-nuts has increased very rapidly since the war. They come mostly from all parts of British India, with very substantial additional shipments from Nigeria and Gambia (West Africa), China and East Africa; and, because of their high oil content (40 per cent.) they are a formidable competitor of copra.

The average price of this product, in 1926, was about £21 per ton, in London, going at times to £23. This highly profitable rate naturally brought a tremendous increase in production, particularly in India and West Africa.

At the moment, the best price offering in Europe is under £10 per ton.

Palm Kernels.

The output of palm-kernels, which come mostly from the West African districts, from Cape Verde, in the north, to the borders of British South Africa, in the south, and from the East Afri can districts just south of the equator (with increasing quantities from the Dutch East Indies), is controlled by units of the Unilever combine, and has decreased somewhat in recent years.

The price sprang from about £20 per ton, in 1914, to over £40 in the postwar period. For several years, to the end of 1928, it kept around £20; but from early in 1929 it began to drift.

It was £17/2/6 at the end of 1929, and to-day is quoted at £10/15/-.

The palm-kernel produces 45 per cent. of an oil that probably is the nearest competitor of coconut oil in point of quality. Although palm kernels are valued at from £4 to £5 per ton less than copra, it must be remembered that the same palm-fruit produces also palm oil, which is taken from the pulp which surrounds the kernel, and which is worth about £31 per ton. This tends to make the oil-palm a profitable crop. But, curiously enough, palm oil is not a direct com-

petitor of coconut oil, while palm-kernel oil is.

Linseed Oil.

Although linseed, produced in Argentine, North America, India and the Baltic regions, is not so directly in competition with coconut products, it gives 30 per cent, of a useful vegetable oil, and has been so enormously overproduced in recent years that it also has greatly influenced the whole oil seed market. Argentine seems to have been the biggest factor in this overproduction. Her average, from 1914 to 1920, was well under a million tons annually. In 1929-30, the crop was over 2,000,000 tons; but there was a decrease in 1930-31 and, as paint and linoleum manufacturers cannot use soya or other vegetable semi-drying oils to any extent as a substitute for the linseed product, the linseed prices tended to keep up, while all other vegetable oils had fallen. But there has now been a sharp decline to £8/10/-, compared with £l9 at the end of 1929.

Whale Oil.

The effect of the enormous increase in whale oil production—mainly the result of Norwegian enterprise in the Antarctic —is well-known to all coconut planters. What is not so well known is the probable future of this industry; and the likely effect of new

chemical methods in making whale oil available for new uses, by deodorisation and neutralisation. These things are so important that they will be discussed in a later article, in this series.

It may be noted, however, that in 1924, when 723,475 barrels of whale oil were produced, the market price was £35 per ton. In 1929, when the production had gone up to 1,861,877 barrels, the price was down to £25 per ton; and at this moment of writing, whale oil of first grade is on offer at £15 per ton. Many people believe that whale oil at £15 per ton is below production cost.

Comparative Value Of Oils.

It is interesting to examine a list of the oil-seeds, in relation to their oil content: ... Value per ton ... in London, ... Oil ... January, 1931 ... Content Copra ... £ 15 .. 0 .. 0 ... 62 per cent.

Palm-kernels ... 10 .15 .. 0 ... 45 ... ,, ...

Ground-nuts ... 9 .15 .. 0 ... 40 ... ,, ...

Linseed ... 8 .15 .. 0 ... 30 ... ,, ...

Soya beans ... 6 .. 0 .. 0 ... 15 ... ,, ...

Whale oil ... 15 .. 0 .. 0 . 100 ... ,, ...

At one time, these various oils were respectively applied to and reserved for particular uses; but to-day, owing to greater technical knowledge and the application of chemical discoveries, the oils are increasingly interchangeable.

The effect of this very important circumstance is seen in the close relation between oil content and price. If, in the opinion of manufacturers, the price of one oil is too high, they can turn to another.

Coconut oil is acknowledged to be the best vegetable oil for a variety of purposes, and for many things is definitely preferred. Other things being equal, manufacturers will use coconut oil. But as soon as the price rises above a certain figure—which they now fix arbitrarily, among themselves— they turn to one of the other oils, and come back to coconut oil when its price falls, or the price of the alternative oil rises. Generally, coconut oil is sought for margarine and better-class foodstuffs: and the other oils for soap making.

Present Condition Of Market.

The South Seas planter, looking over the foregoing figures, can make his own deductions. But here are the conclusions of a leading broker I personally interviewed in London. I may not give

his name, but I may say that he is one of Europe’s shrewdest dealers in oil seeds: “There are no immediate signs of improvement, owing to the plentiful supplies of all available oil-seeds and oils, particularly linseed and whale oil. We expect this year about 1,000,000 tons more linseed, which will produce approximately 330,000 tons of oil, for which it will be difficult to find buyers.

There appears to be an increase of 50 per cent, in whale oil coming forward —who is going to buy it?

“In general, we are facing a situation where supplies of all oils and fats continue plentiful, while consumption is slow, on account of economic pressure everywhere.

“We cannot look for an immediate improvement; but we think that the size of the next crops will be effectively reduced —the present prices will have this reaction upon producers. Of course, a good many oil-seeds, in which cost of production does not play an important part, will not be affected in this way; but crops in which a definite outlay for cultivation is required will be reduced.

“Personally, I do not think there is any room underneath this market. We feel that prices to-day are on bottom— that they have reached a level from which no further fall is possible. We look forward, presently, to an improvement rather than a decline. But that must be entirely governed by economic developments the world over.”

The next articles of this series will deal respectively with the serious effect and probable future of the new whale-oil industry, and the reaction upon the copra industry of the application of certain chemical discoveries to the refining of whale and other oils ; the history, present operations and probable future of the Unilever Combine; and what is now necessary in the copra industry if it is to be carried on profitably in the future. ———

An oil-palm plantation in West Africa. The natives, gathering nuts, climb trees in the usual way, with the aid of belts. ———