WELLINGTON NEWS

Hokitika Guardian, 31 December 1929, Page 2

WELLINGTON NEWS

LIMITING TEA PRODUCTION. (Special Correspondent ) WELLINGTON, Dec. 27. New Zealand and Australia are not ’alone in feeling the depressing effect of reduced prices for our products, for other countries are similarly affected, including th,e East, Java in particular being badly hit by the drastic decline in the prices for sugar and tea. One would have thought jthat the increasing consumption o! tea would be about cancelled by the increased production, but this :‘.s not the case. Consumption would be much greater than it is but for the fact that tea is taxed in many countries. Recent reports from London state that Mincing Lane tea dealers have been discussing proposals to restrict tea production. They fuggest that planters should reduce their output by 5 per cent to 15 per cent on the annual average crop of the last three years, the percentage varying according to the average price obtained.

This confirms ne\vs received privately in Melbourne that negotiations were proceeding between the planters in India, Ceylon and Java, to limit production in an endeavour to promote better trading conditions. The proposal was understood to be on the ■basis of 7£ per cent curtailment in the three growing centres, but this it is said would hardly be sufficient to prevent the continuance of glut conditions in London. Stocks there this season have reached a record total and are about 60,000,0001 b more than those held at the corresponding date in 1927. The quality of the tea in India, and to some extent in Ceylon and Java has suffered because of over production. Restriction of output would improve the quality. Prices for tea at recent sale;} have been less than the cost of production, and unless an improvement occiuß the restriction will amount to the full 15 per cent. The plan evidently provides for a gradual removal of the restrictions as prices improve. Concentrated action will present difficulties, and the breaking aw r ay of even a small number of planters might be sufficient to wreck the scheme. The large number of plantations already cultivated will be a sufficient guarantee that prices will not be unduly inflated.

'lt is rather remarkable that China is not included in the scheme, for although China tea is never grown by individual planters on a large scale, and is always cultivated as a subsidiary crop, yet annual production is round about 300,000,0001 b and must still be considerable, though reliable statistics are difficult to obtain. There are' four chief kinds of China tea—green, black, Oollong and brick. They differ greatly in colour, flavour and in 'other respects, but they ' are all made from the same class of raw leaf. Green and black tea have each four different brands, and each of this again is divided into three or four varieties.

Tliese various sorts are mostly named after the localities in which they are grown.'* To the distinctive topographical descriptions have to he added sundry commercial classifications. Thus there are first, second, third and fourth crop teas, according to the time of picking and manufacture in relation to the Grain Rain festival. Further, Shanghai divides all teas into three groups. There s first the tea that has been thoroughly irepared at the place of production, then there is the teas prepared at Shanghai itself, and, thirdly there is the.,fea partly prepared at the point of production and finished off in the city.

All teas passed through two mif Id lenient between grower and exporter or retailer. These are the local collector and the retailer. The latter is so powerfully organised and regulates the trade so strictly that no one can jbuy or sell teas wholesale unless he is a member of the guild. Brick tea is made specially for the Mongolian, Tibetian, Siberian and Russian markets and is cast in that form because it can be more easily and safely transported by pack animals on overland journeys. It is so general and so long established a commodity in regions like Mongolia, for instance, where ordinary facilities of civilisation are rare, that it is often used as a medium of exchange.

REVIEW OF 1929. WELLINGTON, Dec. 28. The moribund year will pass into history as a year of disturbed money markets and falling security and commodity markets. The chief cause of the monetary disturbance was the excessive speculation on the New York Stock Exchange. Dealings on that exchange are only margins, that is the buyer of shares only pays a portion of the value, the rest being financed by the selling broker with of course adequate security. To finance such dealings brokers have had to borrow from banks and corporations to an increasing extent because of the increase in speculation. The loans granted were mainly at call, time loans which form relatively a small proportion of the total.

The rates for call loans were consistently high ranging from 6 per cent to 12 per cent and occasionally going higher. These high rates oi interest naturally attracted funds from all over the United States and further afield, for a great deal of money was sent from Europe. It was the transfer of these funds that caused an appreciation in the dollar exchange. The demand lor dollars was insistent and large and the transfer of the funds fell largely on the sank of England, which had ulti-

mately to export gold. Furthermore France was in a position to draw gold from London because during the inflation period the flight of the franc was most noticeable. French houses transferred funds to Loudon and New York, and when tlie franc was stabilised French funds were repatriated and this gave France the power to draw gold. Early in February the Bank of England was forced to raise its discount rate from H per cent to s‘, per cent, and this was the first discordant note. But no notice was taken of this by business men and sharebrokers, for it appeared to be assumed that it was a temporary gesture and so in New Zealand and Australia investors in Stock Exchange and other securities went gaily on their way paying high and in many cases fancy prices for shares and real estate and committing themselves to many obligations. When in September the Bank of England was obliged to raise its discount rate another 1 per cent to Gy per cent, and the New York Federal Reserve Bank raised its rediscount rate 1 per cent to 6 per cent the security market received a jolt w’hich sent values tumbling down. In New York there were heavy losses on the Stock Exchange and of course the funds lent to brokers at call were immediately called in and there was reflex movement in the exchange. European funds that were rushed across the Atlantic to take advantage of the high rates ruling in New York were recalled by the European leaders, which resulted in a strong and insistent demand for sterling with the result eventually that soma of the gold sent to New York had to be returned to London, and investors on the New York Exchange have recovered sanity and a sense of value, and are operating soberly and sensibly. When the Bank of England rate went up to per cent it began to dawn upon investors in the Dominion and the Commonwealth that the position was not so richly rose-colour-ed as their fancy painted it. The more astute immediately began to sell and the selling movement gradually gained momentum and values declined. Between about the middle of September and the middle of December there was a heavy decline in share values and especially bank shares which investors had ccme to look upon as gilt-edged and even better than Government securities.

From the beginning of the upward movement in money rates the commodity markets were affected because wholesale buyers had to curtail their purchases. Dear money was a factor and not the sole cause of the decline iu values. Production has increased, and although there has been an appreciable increase of consumption in many lines output has shown a greater increase. At the present time almost every commercial product has fallen in value, and the effect of this is to cause a contraction in purchasing power. The East is suffering as well as the West, and New Zealand and Australia as much or more so than Canada or South Africa.

„What is going to be the effect of this decline in commodity values? Producers will receive less money, that is their incomes will be lower, consequently they will have less to spend- and that again must react on the domestic trade of the countries affected. Thus it would appear that the trade of the whole world will be within smaller compass. There is also likely to be an increased demand for credit, and as is inclined towards .short supply rates will probably go up in the producing countries. The conditions call for caution, care and economy. Wasteful expenditure must be avoided, and everyone must work harder for the common good.