WELLINGTON NEWS

Hokitika Guardian, 11 March 1930, Page 7

WELLINGTON NEWS

MARKET PRICES,

(Special Correspondent.)

WELLINGTON, March 8. The daily commercial news cannot be very pleasing to producers and others who depend upon market prices, for almost every day there is an item of news recording a drop in the price of this commodity or that. The dairy produce market it was hoped would hold up and at the opening of the season the outlook seemed promising but since the beginning of the yeai prices have gone Iback steadily until now the drop in butter represents an appreciable sum when compared with the prices ruling a year ago, and the same can be said of cheese. These two commodities like others are the victims of the law of supply and demand. The supply has increased but tile demand lags. Imports of butter by Great Britain in 1929 were considerably larger than in 1928 and 1927 and the figures provide an explanation of the collapse in prices that took place in the last quarter of last year and which continues. According to the Board of Trade figures the imports of (butter into the United Kingdom last year amounted to 6,406,623 cwt ns compared with 6,112.972 cwt in 1928 and 5,818,611 cwt in 1927. Tlio increase is not so very great but it becomes appreciable when one remembers that there has been a very big increase in the numlbor of unemployed in Britain which has checked the normal demand. Supplies from Denmark were exceptionally heavy and other Baltic countries shipped large quantities, especially in the year when milder weather contributed to heavy production. The drop in prices is directly due to increased production and the future must he viewed from this position. It is a well known fact that high prices for any commodity stimulates its production, while low prices check it. That is the function of prices and the fluctuations indicate wluit commodity is in over supply and what is in short supply. The price of butter in the London market when compared with the pre-war level of values has been very high and that has been an inducement for every country to increase its production and take advantage of the comparatively high prices ruling. It is by no means a perilous prediction to venture the opinion that world production of butter will continue to expand, but weather conditions will of course play an important part in respect to,the volume of production. Last year owing to drought the Australian output was

less than in 1928. but considerably more than in 1927. As Australia has had heavy rains over a wide area of country It is not unreasonable to look for an expansion from that source. If weather conditions turn out favourable world output in the current year should show a further increase and with the increase will come a further drop in values. This point requires to he appreciated and efforts made to meet the changing and changed conditions. Wool is in the same position for the staple is also a victim of the law of supply and demand. The supply increased but the demand has not increased relatively and so the price has fallen. It

is the same with wheat, sugar, coffee, rubber, tin and silver, and prices of all these commodities are at a low point. Producers everywhere are making efforts to improve prices by artificial methods, and the effort takes the form of pools and holding organisations. which endeavour to withhold from the market a percentage of supplies, thus creating a fictitious shortage and causing prices to advance. This system of hold-up has been applied to wheat in Canada and the U.S., to wool in Australia, to sugar in Cuba, to coffee in Brazil, to rubber and tin in Malaya and nowhere have the hold-ups proved more than temporarily successful, the law of supply and demand proving to be too strong. These hold-ups will continue until those concerned have learned their lesson by experience. The North American wheat pools have been longer in existence than other organisations and the leaders of the wheat pools are learning. At first it was private venture and private funds but now it is found necessary to in-

voke the aid of the States and governments are pouring money out to hold wheat prices up which however, refuse to hold up and insist upon conforming to the law of supply and demand. In one wav it is quite a mistake to say that there is an over supply of wheat, or wool or sugar or tea, or of any of the other eommdities that are depressed. Over supply is relative—there is over supply at current prices, but reduce prices and the demand increases for the lower price brings' the commodity within the range of the masses who have been unable to afford the current price. Of course the producer should be justified in pointing to the cost of production as a bar to reducing prices, but the consumer wants to know what steps if any have been taken by the producer to reduce costs. Tim next move in the games is not holds-up- which are futile, but cost reduction. But this is quite another story.