Copra Recovers
p. 17 · Read in the full issue
From £10/5/- to £14/10/-
In 9 Weeks Worth Over £17 Per Ton in Australian Currency
If anyone had said on September 4, when copra was quoted at the un precedentedly low price of £10/5/per ton, c.i.f. London, that within nine weeks the same copra would be quoted at £14/10/- per ton, he would have been rudely invited by merchants and growers to see a brain spec ialist.
Yet the incredible thing has hap pened. Copra is back at a price that, even when quoted in terms of ster ling, gives the South Seas Island grower a margin of profit. The copra producer in the Australian section of the South Sea Islands is, of course, in an even happier position, because he is enjoying the premium confer red by the Australian exchange.
The British copra producers in the Pacific, outside of the Australian sec tion, are now receiving from £9 to £10 per ton for their copra—that is, the London price, less costs, insur ance and freight. They are not go ing to make a fortune at these rates, but they are going to carry on com fortably enough.
But the copra producer in the Aus tralian Islands, so long as the Aus tralian exchange remains where it is to-day (namely, at 30 per cent.), should be making quite a good pro fit on his production. From to-day’s London price of £14/10/- per ton he must deduct costs, insurance and freight let us say, £3/10/- per ton.
That leaves him with £11 per ton in sterling. To convert this into Aus tralian money he must add 30 per cent. That brings his nett return up to something over £14 per ton. In other words, the premium conferred by the Australian exchange adds about £3 per ton (in Australian money) to the quoted price of copra.
That is satisfactory from the plan ter’s point of view, provided that he can purchase all his requirements in Australia. If, however, he has to use his Australian money to purchase his requirements in countries other than Australia, he will, of course, lose the benefit of the 30 per cent, exchange; and will be in the same position as the British copra producer in the non-Australian section of the Pacific —whose position, however, is now also satisfactory.
This remarkable situation, of course, has developed partly because of Britain’s sudden abandonment of the gold standard. As the British pound, in relation to gold, is now worth from 20 to 25 per cent, less than formerly, it follows that the price of copra has risen in propor tion. But copra has also risen in re lation to gold, by about 20 per cent.
The rise in the London quotations for copra from £10/5/- per ton in early September to £14/10/- to-day is equal to the decreased value of the English pound in relation to gold (20 per cent.), plus the rise in intrinsic value (another 20 per cent.). If the English pound becomes more valuable in relation to gold, the price of copra will fall. If it becomes less valuable, the price of copra will rise.
Copra, stated in terms of gold, is only 20 per cent, above the price it was early in September. The Dutch and French producers of copra are to-day getting only that 20 per cent, benefit, and the price gives them only a modicum of profit. That is a very important point. The price of copra cannot be: reduced much beyond its present figure (which is between £12 and £13 per ton stated in terms of golden sovereigns) without putting the Dutch and French copra pro ducers out of business. Therefore, as long as Britain remains off the gold standard to the extent that she is to day, so long should British coconut planters be able to produce copra at a profit.
It is a very interesting development of the exchange position; and even more interesting is the fact that Aus tralia has been able to maintain the 30 per cent, depreciation of her cur rency in relation to sterling, even although sterling has fallen from 20 to 25 per cent, below gold.
Of course, the other side of the picture is that the Australian pound is worth only half a golden sovereign in relation to francs or dollars, which have remained on the gold standard; and there are many classes of people who will feel this angle of the situa tion very acutely. But, obviously, the coconut planter in the Australian Is lands has no complaint. He does not mind how long Britain remains off the gold standard, or how long Australia succeeds in holding her currency 30 per cent, under sterling.