Future Of The South

Pacific Copra Industry

Need For Early Planning At Governmental Level

By R. W. Robson.

London, July 11.

WHILE present conditions con tinue (that is, an uneasy peace, but without any World War 111 or Depression), any esti mate of the future of the South fpacific copra industry will take into [consideration the following factors; [ o The MOF (British Ministry of [Food) Contract will expire at the fend of 1957; and the various in terests concerned already are lining ?up for a new era in marketing and

transportation.

I • There is no doubt that the MOF [will fight for the full 10 per cent, [reduction in price in 1956 and with prospects of success.

I • The world free-market price of [copra is not controlled by the laws of supply and demand, in relation to copra. About a dozen import ant sources of oil supply, both vegetable and animal, are com petitors with coconut planters and these commodities rank almost equally with copra production in relation to the factors which fix market prices. • Unilever Limited, the inter national combine which still in fluences, if not dominates, the manufacture and distribution [throughout the Western world of substances made from vegetable land animal oils (soap, margarine, etc.) has lost little of the strength [through which it controlled the [world’s copra markets in 1930-1940; ;and probably it will play an im portant part in the British copra [market after 1957. Through per sonnel, there appears to be a close [and apparently friendly (and not [necessarily improper) association

between the British MOF organisa tion, which buys and sells South pacific copra and Unilever, „ • The South Pacific copra situa tion is likely to be increasingly affected by the establishment and operation by Carpenter interests of copra crushing mills in Fiji and New Guinea, and in Canada. There are indications that Unilever does no t i ike these developing enter prises. These mills, and the pro portion of South Pacific copra which they handle, and the attitude of Unilever towards them, may be a factor of considerable importance m the future. • There are indications that the United States market may be open to the ebb and flow of vegetable and animal oils m the future to a greater degree than in the past, with perhaps some challenge to Unilever influence It will be re -2} en ?J? ere T c J that before Woild War H, the United States market and Philippines copra production were pretty well tied together, to the ex elusion of the rest of the copra world, which thus was left to Unilever A 1 ‘ , , * Already .discussions are afoot concerning the kind of organisa which b^+v? 0111 ? at the , ? nd I?®7 to take the place th e machinery created by the Ministry of Food and the various British Governments to handle and coconut oil under the MOF contract.

Is there to be a complete re version to the private enterprise system that operated pre-war? Or will there be a move by the Gov ernments of Australia New Guinea, Solomon and Gilbert Islands, Fiji,

New Zealand, Samoa and Cook Islands to form a joint organisation for the handling and marketing of coconut products? No one knows— but the signs so far indicate a re turn to private trading.

I have spent some little time here in London discussing these factors with various men interested in the great oil-seeds market, and trying to reconcile their differing viewpoints. The following repre sents the present situation, and long-distance prospects, as I see them now.

UK Losing Heavily

On MOF Price THE Ministry of Food contract was made in 1948 for 9 years and it expires at the end of 1957. At the moment, there is absolutely nothing to suggest that it will be renewed. There are signs that it will be allowed to expire.

The original plan was designed to (a) stabilise the copra industry in the more or less war-torn British countries of the South Pacific in the unpredictable period of post war economic reconstruction, and (b)) ensure for Britain a regular supply of an important food com modity.

It has done both those things.

So far as price is concerned the British Ministry of Food gambled.

It took the 1948 average market price as a basis and agreed that, from year to year, the price to be paid the producer should not rise or fall more than 10 per cent.

For the first four or five years, the Ministry very definitely won. It took all the British South Seas copra (and coconut oil) at the MOF contract price, and sold it at the free market price; and for at least four years it made a substantial profit on practically every trans action —its accumulated profit in that period must have run into several millions Sterling.

Then, about 1953, the tide turned. (The causes of the market decline

will be discussed later). The market moved slowly but surely against the Ministry, until to-day it is losing from £lO to £l2 on every ton of copra taken over under the con tract. A man who is in constant touch with the market here pre pared for me these figures, as on June 18, 1955:

As everyone knows, that has been the market tendency since 1953, with occasional spurts of price re covery. There have been special factors since early 1954—mostly, the liquidation of huge State-owned stocks in certain countries —which have depressed the market. Those factors may now be disappearing.

But even if the market falls no further it will require two full 10 per cent, reductions (end of 1955 and end of 1956) to bring the MOF price down to the market price of June, 1955.

Much the same conditions apply to the coconut oil market. Under the MOF contract, the Ministry takes all the coconut oil made avail able by the Carpenter mills in Fiji and New Guinea.

This year, for example, it is pay ing £lO6/15/- Stg. per ton FOB for the oil it takes over in Suva.

The free market quotation in London for the oil in mid-June was just over £9O, GIF. A simple calcula tion shows that the Ministry is making a loss of between £25 and £3O per ton on that (Fiji) section of the contract; and something similar presumably in New Guinea.

Nonetheless, the Ministry still is well in pocket. The profits it made in 1949-53 far outweigh still the losses it has made since. And the Ministry has the comfort of know ing that it has brought a period of unprecedented prosperity to the copra industry of the South Pacific.

Copra interests howled in 1949-53, when they saw the Ministry mak ing those profits out of their com modity. But they are complacently silent now—and they can remain complacent until the end of 1957.

There was a first-class behind the-scenes struggle here in London at the end of 1954, when the parties concerned got together to fix the 1955 MOF price.

Knowing the market trend, prac

tically all the South Pacific Govern ments except Australia were recon ciled to the full 10 per cent, re duction. But Australia’s repre sentatives here (Chief Trade Com missioner Sir Edwin McCarthy, and his deputy, Mr. D. Paterson), backed up by High Commissioner Sir Thomas White, and by the Burns Philp and Carpenter men here, made such a strong point of the “losses” which the South Pacific copra industry had made in 1949-53 as a result of the MOF contract, that they persuaded the Ministry to make the reduction instead of 10 per cent.

A simple calculation shows that this is worth well over a quarter million Sterling to the South Pacific industry in 1955, and something in 1956, when the 10 per cent, reduc tion expected will be on the 1955 price arrived at through the 7 h per cent, instead of 10 per cent, re duction.

Commodities Which

Compete with Copra

IN trying to envisage the future of the industry, both immedi ate and distant, it is necessary to bear in mind that, to-day, the following substances can be used in many if not most manufacturing processes as an alternative to coco nut oil; VEGETABLE —Groundnut (pea nut) oil, soya bean oil, linseed oil, cottonseed oil, palm kernel oil, olive oil —all in huge supply—and oil from many other kinds of nuts.

ANIMAL —Whale oil, fish oil (big supplies of herring oil are now com ing in from Norway), tallow, lard, butter and similar substances.

One of the first articles I wrote in the PIM, 25 years ago, was a warning that new processes in puri fication and deodorisation were allowing the manufacturers to use an increasing number and quantity of substances, hitherto rejected on account of coarseness and odour, as substitutes for coconut oil.

To-day, all the above commodities —and a few more of a minor character—are firmly established in the world markets as competitors of copra; and powerful and extremely efficient international operators like Unilever, naturally, balance one against the other, and purchase whichever one is likely to return the most profit to their manu facturing process. (There is noth ing improper about that, so long as it is done in a free market, and not a market controlled by com bines and monopolies.) I have taken the following official estimate of the world production of the main oilseeds from the report of the Commonwealth Economic Committee in respect of the year 1953-54: The figures show thousands of tons:

Groundnuts . 10,889 Cottonseed . , 15,1 Soya beans . . 17,80 ft Sunflower . . 4,2 Sesame seed . 1,931 Olives 1,2 The above are described s “edible.” The following are “edibt and industrial”: Copra 2,850 „ . . , „ Palm oil 700 Palm kernels 8 The following are * “industrial only: Rapeseed .. 4,764 Linseed . . 3,01 Castor seed 452 Tung 1 There are at least a dozen otlu smaller sources of vegetable c supply; and there are, of course, tM animal fats listed above.

The foregoing figures show Pro duction. A very large proportion i such commodities as groundnui and soya beans are eaten in tM countries of production (maim Asiatic) before they reach the wor; markets.

That fact gives the world produt tion of copra (nearly 3,000,000 ton per annum) a greater significance nearly all of it is exported, either $ copra or oil.

(Continued on Page 151)

Sterling Price paid by Ministry for Copra, per ton.

FOB, Pacific Islands port £65 0 0 Est. cost of Freight, Insurance and charges, per ton .. 13 0 0 Est. cost per ton of Copra at European port (CIF) 78 0 0 Market Price of FMS Copra to-day in UK or Continental port,

Cif

67 0 0 Apparent loss to Ministry. per ton .. .. 11 0 0

I The following are the official estimates of copra production in re spect of the year 1953; They do not include copra produced for local consumption, but do include copra converted into oil for export: The figures show thousands of tons; Ceylon . . 225 Other Fr. Terr. 20 Malaya 152 India 190 Br. Borneo 27 N. Guinea and 9ther Br. Pac. Papua 80 * Is 55 Fiji S 3 Other Br. W. Trinidad 15 i Indies ... 15 Tanganyika . . 12 Other Br. New Hebrides 24 iC’wlth. . 40 Mexico .. 59 Indonesia 730 Phiiipoines . 850 Mozambique 48 Fr. Oceania 20 tndo-China 15 Other foreign 70 f That gives a total of 2,691,000 tons, t was up to 2,911,000 tons in 1951 town to 2,300,000 in 1948. It there ore will be seen that there are five lain sources of coconut products in he world— [Ceylon, whose copra now is almost wholly milled to oil and meal before [ is shipped: {Singapore and the East Indies;

[Philippine Islands;

India; South Pacific Islands. (P-NG Fiji, few Hebrides. French Oceania and ther Pacific Islands together pro lice over 200,000 tons per annum.) A lot of copra comes out of the last through Singapore; but there Is been considerable disturbance of le Indonesian supply as a result of ie present struggle between the idonesian Government and the ptch interests still established fere.

Formerly, every little group in the |st Indies sent a trickle of copra to the chief shipping ports by the ball inter-islands fleet of the iwerful KPM (Dutch) shipping le: the KPM not only carried but btrolled the sale of the copra Irseas —a large proportion of the bra producers thus were “tied” to

6 Kpm.

iWhen the present political [uggle in Indonesia became acute, fe KPM withdrew a large proper )n of those inter-islands ships, th the result that a great deal of ter islands copra cannot reach I markets. If it could, there w r ould [enough of it to affect the Euro an quotation. The wise computer ould assume that sooner or later [will get to the markets, jhnong the factors affecting copra’s pre must be considered the [ative value in oil content of all ese products. The official oil ex totion rates for vegetable oil seeds n average made through years of penence) puts copra (63 per cent.) [the top of the list. Only one ier seed comes near it—the com ratively rare babassu kernels long copra’s main competitors, the xt nearest are palm kernels (45)

stor seed (43), groundnuts (42),

rapeseed (35), cottonseed (18), soya beans (15).

Copra production, giving a high oil content, and very well organised all over the world in respect of transport and distribution, has some definite advantages over its com petitors.

Where is Unilever

Of the Future?

BUT, if world production and dis tribution of copra are well organised, so also is the world market. That organisation is probably the most important factor to be considered in relation to the future.

The International Association of Seed Crushers held their periodical Congress in Baden-Baden, Germany, on June 8. I was deeply interested in the review of world supply and demand given by the President. Mr.

J. C. A. Faure. (The name of Faure has been well known in the Western European oil-seeds industry for generations. This Mr. Faure is not only a distinguished figure in the oil-seeds world—he is, or has been, closely associated with Unilever).

The kernel of his address, and his close analysis of world production figures, was that there is much freer movement of vegetable oils throughout the world; that world consumption is steadily increasing and that world supply is just about taking care of demand. His conclud ing summary is worth quoting in “The past 13 months have seen an interesting change in the liquid edible oil situation throughout the world.

“During the post-war period, up to 1954, liquid edible oils were regarded as the group most seriously in short supply, except in the United States. Since these US surpluses of liquid oils have been made available to the rest of the world, the supply situation of all oils and fats, including the liquid oil group, has become much better balanced.

“Whereas in post-war years we had two distinct and almost watertight markets (the dollar and soft currency

markets) we have now reached the point where we can again talk of ‘world" market values. From now on the world will have to take much closer notice of markets and conversely, the United states’ domestic markets will have to watch much more closely the world markets overseas, in Europe and else where.

“Finally, 1954 and 1955 hav3 shown that world consumption is increasing rapidly, but that world production is keeping pace with the greater needs. The freer move ment of oils and fats throughout the world should act as a stabilising factor on price levels.”

That suggests that there will be a fairly competitive market for our South Pacific copra when we go out again into the cold hard world at the end of the MOF contract in 1958.

But to what extent will compe tition be conditioned by monopoly organisation among the buyers?

A quarter-century ago, when first I analysed the world copra situation for the South Pacific planters I presented Unilever as the big, bad wolf of the world’s oil-seed markets.

The Lever combine seemed to do

what it liked with copra produce and all the old hands will rememi well what the combine did.

Much has happened since the:; especially the intense Govemmr controls of the war and post-T periods (about 9 years) and MOF Contract (still current).

But Unilever has not been out) the picture. On the contrary, Le= personnel has had much to do w British Government control, s with the operation of the MOF C' tract. The British Governmr (even the Socialist set-up, 1945evidently thinks a great deal.

Unilever. A Lever received a vi high honour in the 1955 Birthi List.

History records few changes* heart by big, bad wolves; and I hr seen nothing here to suggest tf the Unilever of 1955 is any diffen from the Unilever of 1930.

It is interesting to note, example, that this year and I while the British Ministry of F 1 is selling the copra and coconut) bought under our contract price a substantial loss per ton the m buyer of the product is Unite There is nothing wrong with ths.

Unilever is in business to nr profits—and is making them.

The moral is that any Gove ment or big national institui which contracts to buy a prim product like copra over a perioo years must, if it is going to proc itself, control also the end use marketing of that commodity.

British MOF, in 1948, did nott that —it gambled on the future pq of vegetable oil.

In 1931, I said that Unilever o trolled the world market, by inr national and inter-contines manipulation; and others said! and the statement as far as I ki never was challenged.

To-day, I do not know. I can. imagine that the wolf has has change of heart. But, notorioK wolves can be scared.

There have been some rag terrifying politico-economic alti tions in world affairs since 1945 c we are going to fight off commun. by creating Welfare States, and J ing the common man a better « we cannot in logic allow in national combines to prey u either producers or consumern the way they used to do.

Western world is trying to getf of its politico-economic muo now by saying that it will tolerate exploitation of the comn people (labourers or producern traders) by either Internatit Communists or International O bines.

We shall have to leave it like t Maybe, the big wolf —seeing the, evitable end of wolfdom —will noi as bad as he used to be. Ms] the horrid spectacle of what is ca ing in the East has changedb heart. Maybe.

Anyway, Unilever remainn

factor which is regarded with con siderable uneasiness, still, by men who are trying to plan an organisa tion for shifting and marketing South Pacific copra after the expiry of the MOF contract, at the end of 1957.

Problems for Men Who

Introduced Crushing Mills

N considering the future of the S.

Pacific copra trade, and the world market generally, the presence in the various areas of sopra-crushing mills outside the pnilever control, is a factor of im iortance.

I As everyone knows, Carpenter in terests have established big mills in Suva and Rabaul, and are closely [ssociated with the operation of nills in Canada. Nearly all Ceylon’s [reduction now is milled by estab ishments in Ceylon. There are im brtant mills in Malaya, IA quarter-century ago, Unilever lad a dominant voice in the opera ion of most crushing mills; and here is evidence that the Unilever fverlords do not like this growth of mills around the world, |nd that the markets which they fifluence are not kind to the pre fects of those mills when they come

leking buyers.

[lt may be remembered that, in he beginning, Ceylon entered the lOF contract. But, seeing that the lOF price then was below world larket price, and feeling sure that I could itself sell its coconut oil to ttter advantage, Ceylon broke away fom the MOF arrangement and

bnefited accordingly.

[Now, with the market the other fay, Ceylon is hawking its huge reduction of coconut oil around the brld. Europe is not friendly; so a rge quantity of Ceylon coconut oil fcently has been dumped in USA, lid has knocked the stuffing out of le markets there, for the time be lg.

Carpenters’ mill in Rabaul could psh 25,000 tons per annum of ING’s production of 100,000 tons, [allowed; but owing to the MOF’s ern restriction on the quantity of fconut oil which it will accept from ew Guinea, the mill takes only LOOO tons per annum. The Suva tablishment probably could mill le whole of Fiji’s copro production •but at present it does not treat ore than two-thirds.

Is the fine hand of Unilever dis pible in these MOF decisions? I

[not know.

Is it a desirable thing, from the ewpoint of the South Pacific pro pers and Governments, that a rge proportion of the copra should [milled within the Territories, and ipped away as oil and meal? ff it is, then unquestionably there M have to be co-operation between e Governments and the Carpenter wrests after the MOF contract

Ipires so as to ensure both trans ort and distribution facilities for ae products of the mills. ?At present, the producer gets a xed price as soon as his copra jaches his local port of shipment, ix months may elapse, then, before ie copra reaches the market irectly as copra or in the shape of 1 and meal; and that market is lifting all the time.

At the present time, the British biistry of Food is the middleman; id if MOF makes a loss, the Eng taxpayer pays. (Personally. I mnot see why the terribly over irdened English taxpayer thus lould subsidise the copra producers the Australian and New Zealand iuth Pacific Territories —but that another matter).

But with the end of the MOF the British middleman is minated. [f. thereafter, all South Pacific bra interests are to be on their m. the position of the South Scific copra millers obviously is go lf to be very difficult. How can By buy the copra at a fixed price less, simultaneously, they can fee sales of coconut oil and meal fficiently far forward (say six pths) to cover their costs and lure a profit? Their only altern pe is to gamble on the future of I coconut oil market, traders in copra who ship the |>ra directly to overseas markets mot take the same risk in respect time (they can get to the market much sooner) —but they do take nsk. And that time-lag between I buying and selling of South kific copra obviously must tend to ve a depressing effect on the sale copra from planter to trader. The iders and shippers, subject to the paries of shipping and transport d overseas markets, apparently Ist gamble; but they reduce their i as much as possible by paying [ lowest price they can induce the hter to accept. [hipping is a real problem, for h copra shippers and coconut oil nucers in the South Pacific. Ship pers are wary about this traffic [is so difficult to get cargoes from [ope or North America for South nfic Islands ports, and one-way Bing can be very expensive. * * * ill in all, it would seem that there real need for early consultation ween the interests likely to he Kted hy the expiry of the MOF tract—namely, the Governments pritain, Australia and New Zea d: the middlemen, like Messrs. [ns Philp, Carpenter and Morris tstrom, who will he expected to }dle the copra production; the ra crushers, who have a special P[em; and representatives of the vnut planters in all Territories Med h ° le future nom is directl V Jesley Church, Lautoka, Fiji, its golden jubilee on [Ust 7. The Lautoka Circuit now prises ten congregations.

Novice Boxers

at Suva

Of 66 competitors in Fiji Amateur Boxing Association's first open novice competition at Suva, 54 were coached by Corporal H. Char man. In this group are B. Issacks (flyweight), H, Hatch (winner of the

light welterweight

contest), T. Schuster

(lightweight winner)

and B. Wendt.