Copra Market Crashes
pp. 11-12 · Read in the full issue
Sales at £7/12/6 (London) Cause Dismay Among Merchants
THE copra position at the moment of this writing (January 12) is by far the worst in the history of the industry.
The official price at the beginning of this week was £8 per ton, c.i.f., London; but a Burns, Philp cargo was sold in Europe yesterday (January 11) at £7/12/6. It is expected in well-informed circles that the price will come to £7 per ton, c.i.f., London.
For months, the price has been falling.
Every grower and most merchants in terested have tried to maintain a spirit of optimism. “The price is unprece dented,” they kept on saying, from week to week; “it cannot nossibly fall any lower. The position is absurd. There must soon commence a recovery in prices.
Don’t sell at these ridiculous figures— hang on to your copra.”
It seemed sound advice; but develop ments during the past two or three weeks, and a perusal of information gathered from various parts of the world, have brought all interests concerned face to face with startling realities.
Here is a paragraph from the well known American magazine “Soap,” dated November, 1933, which has been circu lated in Sydney during the past few days: The production of coconut oil this year has already broken the record of the past ten years.
Copra receipts of Manila and Cebu (Philippines) for the first ten months of 1933 have far ex ceeded even the heavy production for the full year of 1928. Thus far this year, copra receipts have been 410,000 tons, which will probably mean a 500,000 ton total for 1953. Last year the total was 284,000 tons, and in 1928, it was 389,000 tons.
As a consequence of the copra situation, the sup ply of coconut oil is abundant, and prices are low. In fact, coconut oil is close to being the lowest-priced vegetable oil available to-day. To the average soapmaker, it presents a golden op portunity, if he will but take advantage of it.
That there has been some rather heavy “smart”
buying over the past few weeks is quite gene rally known. It has been done quietly without disturbing the market, but nevertheless a large tonnage has been taken.
A Sydney merchant, who probably has the shrewdest and longest vision of any regarding the copra market, gave it as his opinion, three months ago, when copra was at £9/12/6, that the London price would fall to £7 per ton and that the next two years would be the blackest ever known in the history of the indus try.
His reasons were threefold. First, there is economic nationalism —the marked tendency all over the world for nations to erect barriers and shut out the products of other nations. This very seriously affected the European copra market. Then there is the great and growing practice of using such com modities as purified and deodorized whale oil, soya bean oil, pea-nut oil, in place of the formerly indispensable coconut oil.
There also has been a great over-produc tion of whale oil and soya bean oil.
Finally, the condition of the copra mar ket during the past two years has been prejudiced by enormous over-production.
Coconut planters generally have tried to counteract the heavy fall in price per ton by practically doubling their output of copra; and, to-day, as the paragraph from “Soap” indicates, the over-produc tion is terrific.
Still another factor which has seriously affected copra, according to very late ad vices from London, is huge world-wide production of cheap butter, which has rapidly taken the place of margarine.
Economic nationalism is taking new forms. Cablegrams from London this week make reference to some mysterious new “monetary policy” just introduced by Hitler, thus preventing the sale of coco nut oil to Germany.
The coconut planters in the Pacific Islands must now face the facts —and the facts are of a disquieting character.
Many people, reasonably well-informed, had anticipated some slight recovery of the copra market before the end of 1934.
On present appearances there is not much to be hoped for in this direction. There should be a price recovery—but it may be a recovery from something around £7/10/- per ton up to £10 or £11 per ton, and the latter price in any event is calamitous.
What is going to happen to the coconut planters during the next year or two? We have discussed the matter with important Sydney interests concerned with copra production and we find a unanimity of view that the coconut planters generally must be told that for a year, at least, they will be lucky if they can sell enough copra to buy bare necessities.
The position, of course, is causing the Big Firms the greatest anxiety. They recognise that in the great majority of cases there is a kind of expectation that they shall provide sustenance for the planters whom they have already fin anced during the past two or three troublous years. But the view is held strongly by them that they cannot be ex pected to carry the planters any longer under the present calamitous conditions; and some among them are definitely in favor of suspending their South Seas buying and trading operations altogether for a time. It is a fact that during the past week a proposition along these lines was seriously discussed among certain Big Firms interested; but it was finally agreed that, while there was every econ omic and financial justification for such a move, a decision to suspend entirely their buying of copra would impose hard ships throughout the South Seas amount ing to absolute cruelty. In many of the groups the product of the coconut is the only medium of exchange.
No official decision was reached; but South Sea planters may find within the next few weeks that a number of trad
ing firms are prepared to purchase only an absolute minimum of copra. The latter are prepared to do this, for the present, and take the risk of the sick and falling market, in order that planters generally may have something with which to provide themselves with the necessities of life.
It is recognised that these conditions will mean the dispersal of native labor forces on very many plantations, and that a proportion of the smaller plantations will return to the bush. But there is nothing else to be done, according to the view of the future taken by the merchants.
The position of the big trading firms with financial interests deeply involved in plantations is not a comfortable one, and they could not be blamed if, in some cases, they gave all their thought and energy to protecting their own interests while they left the planter, who is in occupation of the property, to shift for himself. However, our information indicates that that policy is not likely to be followed.
“We are not going to desert the planter, even if he is already greatly in our debt,” said a prominent member of Messrs. Burns,
Philp and Co. “But the planter must recog nise that for the present he is really up against it. He must realise that he is, like us, face to face with a position in which copra for the present is literally unsaleable, and that that position is likely to continue for a long time to come, The wise planter will face the position resolutely. He will not attempt to hold an expensive labor line together. Instead he will get rid of all the labor he can spare, as quickly as possible; he will reduce his living expenses to an absolute minimum, and try to make his plantation provide as much as possible of necessary foodstuffs for himself and his household; and he will, with the aid of his few house boys and personal servants, cut only a sufficient quantity of copra to buy the things that absolutely must be bought.”
The foregoing is the position, so far as it can be ascertained in Sydney to-day by the “Pacific Islands Monthly.” We have said, in the recent past, that copra could not fall much further in price and that the market must soon recover, and we were accused of unjustified optimism.
We must now acknowledge that copra has fallen to a new and almost incredible level; and we feel that we would not be
treating our readers fairly if we failed to present the pessimistic aspect that is out lined above. At the moment there does not seem to be a single ray of hope for the coconut planter; but we still refuse to believe that so serious a state of affairs can continue for “a couple of years.”
At the same time We think that every planter engaged in coconut production would be wise to take the gloomy view and prepare himself for a kind of siege.
It seems impossible to line up coconut producers throughout the world so as to control and limit production, and thus bring prices back to a reasonable level, as was done in the rubber industry. But if the price remains under £10 per ton for any length of time, it is obvious that production must shrink, and the same re sult be achieved.
The main trouble in connection with this industry is that the average coco nut-grower produces quite blindly. In connection with practically every other industry in the world, it is possible to make some reliable forecast of produc tion and thus anticipate prices and regu late output accordingly. In the case of coconut growers—who include so many natives who are scattered so widely throughout the tropics and who are com pletely unorganised—it is impossible to get any reliable indication of production.
We must just hope that this calamitous price of less than £8 per ton will put an end to the ridiculous over-production of the past two or three years. But, obvi ously, that influence will work slowly and the result of it may not be seen for an embarrassingly long time.
A Fiji Summary
The Fiji Coconut Planters’ Union, un der date December 28, reported: “We shall all be glad to say good-bye to the year 1933. It has been to all coco nut planters a year of disappointment after disappointment, as can be noted from the fact that copra prices were 75 per cent higher at this time last year than they are to-day.
“As for the New Year, we think that whilst we have seen the worst, the chances are that low prices will continue to prevail during 1934. Once the whale catch is disposed of in Europe, we think it probable that some slight advances will be recorded. We take the view that the present low prices of copra and whale oil will have the effect of reducing the quantity of ground nuts, soya beans and other annual crops which will be planted in 1934. The reduction of these crops must inevitably be reflected in higher prices for copra.”