Products Of The South Seas

Why Copra Has Fallen to £10-5-0 Per Ton

THE fall in the price of copra dur ing the month to the unpreceden ted rate of £10/5/- per ton, c.i.f.

London, has left all students of the market dumb and numb. When copra was around £13 and £14 per ton, the best-informed market operators declar ed that that was rock bottom—and this seemed a reasonable assumption.

But, apparently, the dominating ele ments of the situation were two namely, the power of the Unilever combine and the tremendous flood of whale oil, which has been poured upon the market during the past 12 months.

Whale oil has been selling at a price definitely below production cost; new chemical processes and discoveries have permitted whale oil to be used in increasingly numerous directions as a substitute for coconut oil; and Uni lever, controlling so large a portion of the world’s demand, has been deter mined, apparently, to get the fullest possible commercial advantage out of an extraordinary situation.

In the May issue of this journal there were published figures which have a direct bearing upon the pre sent position. It was shown that the cost of producing refined coconut oil from copra is £15 per ton; while the cost of reducing raw whale oil to a refined and deodorised oil is £6 per ton. Whale oil has been thrown on the market at £15 per ton or less therefore the estimated cost of the re fined product is £21 per ton. When the cost of copra was £14 ner ton, the cost of refined coconut oil, with the cost of refining (£15) added, was £29 per ton, less whatever amount could be received from the sale of the cake by product. Assuming that the value of the cake is now £4 per ton, it is obvi ous that refined whale oil at £21 per ton has an advantage of £4 or £5 ner ton over refined coconut oil, with copra at £14 per ton and cake at £4.

On this assumption, the course of events seems fairly clear. Unilever has thrown the price of copra back to £10 per ton, so that the price of the refined coconut oil is now practically level with the price of refined whale oil. We sug gested in our last issue that the dan ger to copra producers of the recent

terrific production of Antarctic whale oil could not be exaggerated.

The latest quotation from London for copra shows a recovery in the price of about £1 per ton. Our private ad vices from London are to the effect that this is not a true indication of the position it is merely a nominal quotation, the result of small opera tions by speculators. The European market, we are informed, is “absolutely dead’’ for the present.

The outlook is blue. It is no use dis guising the fact that the position has never been worse. In a search through the records of half a century, we find that the lowest previous European quotation for copra was £12/13/9 per ton in 1897. The combination of un favourable factors, described in our issues of March, April and May, have been too strong for the producers, and have taken control of the market for the present.

But the situation, while bad, is not hopeless, as some Sydney observers are inclined to suggest. The law of sup ply and demand will certainly operate presently in favour of copra producers.

There has been a tremendous reduc tion in the Antarctic whale-catching enterprises; and all over the world pro ducers of oil-seeds are restricting op erations. Certainly, inevitably, the overproduction of oil-bearing sub stances will be reduced. Somewhere about the same time the world will recover from its economic sickness and will be able to resume normal con sumption of the hundred and one things in which refined oil is used.

The pendulum will swing again in the opposite direction to that of 1930-31, and producers will benefit accordingly.

In the meantime, it is simply a ques tion of hanging on. Plantation owners are faced with a lean time there is no getting away from that. But they would be foolish to give up. They must cut costs to the bone, exercise every possible economy and just hang on and keep a bright lookout for signs of re covery. They will not come immediate ly but neither will they be too long delayed. Meanwhile, they will be wise to take steps to bring all capital valu ations, based on copra at anything over £20 per ton. down by 20 to 25 per cent., at least.