ON

VARIOUS BRANCHES OF TRADE

REPORT OF THE SUGAR TRADE FOR THE YEAR 1925

During the crop year 1924-1925 the island of Cuba produced 5,125,714 tons of sugar as against a crop of 4,966,642 tons in 1923-24, which to that time was the largest on record. The total world production last year amounted to 23,604,203 tons, an increase of 3,494,895 tons over the year before and a little over 6,000,000 tons above the average for the eight crop years from and including 1916-17. The above figures and those hereafter used in this review are based on the long ton of 2,240 pounds.

The preliminary estimates made by recognized trade authorities at the end of 1924, and early in 1925 after the Cuban crop had got well under way, were high but had to be revised upward later. They had a most depressing effect upon sentiment in all branches of the trade and most notably upon the speculative element represented by traders in sugar futures on the New York Coffee and Sugar Exchange. Had the possibilities of world consumption been given the consideration due them there can be no question that the slump in prices which occurred between March and November would not have had to be recorded.

The cry was "too much sugar". It was not conceivable by the majority of traders that the world could absorb anything approaching the quantity that appeared to be in sight. Production figures were always prominently to the front but those representing distribution were not available, except in a fragmentary way, until near the end of the year, when it was too late for them to have any pronounced effect upon the course of prices, and especially as a still larger crop for 1925-26 was indicated by reports from practically all producing countries.

At the beginning of 1925 there was a shortage in supplies of sugar everywhere. There was no carry-over in Cuba and in other countries the largely increased consumption during the preceding years had closely absorbed the supply. Consequently a good demand from Europe, more especially the United Kingdom, together with unfavorable weather in Cuba kept the market firm during the first two months of the year, but early in March after sales at 3c. cost and freight or 4.84c. duty paid, which proved to be the high point for the year, a gradual decline occurred as the weight of production increased with no compensating expansion of demand at the time. There were moderate rallies at times in response to some broadening of the market, but until late October the general trend of prices was downward. At that time Cuban raw sugars sold at 11&c. per pound cost and freight or 3.71c. duty paid, the lowest point for the year. The average price for the year was but slightly above 21⁄2c. cost and freight compared with 4.20c. in 1924 and 5.24c. in 1923. Only a few times in the past thirty years has the price dropped even for a short time below 2c., while it has averaged about 3c. for that period. Except in the most favored locatities 22c. cost and freight will not cover the costs of production. A majority of the mills would have to obtain 234c. at least before they could figure a profit on market sales. That is the reason why producers have used the New York Sugar Exchange more freely than ever before in selling for future delivery, thus "hedging" part of their crops to better advantage than by disposing of them in the ordinary course of trade. Trade operators all over the world as well as manufacturers and some refiners also did far more "hedging", with the result that the volume of business on the exchange was extraordi

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narily heavy during the year, the total turnover for the period exceeding ten and a half million tons.

The weakness of the market during the third quarter of the year, while due in part to the prospect of still larger crops in 1926 was accentuated, as has already been intimated, by lack of knowledge or appreciation of what was being done at the distributing end. The buying power of the world which had become noticeably greater in 1924 as compared with previous years following the war, was further largely increased in 1925 by continued progress toward normality in the economic affairs of Europe and the great prosperity enjoyed by this country. Sugar having become by far the cheapest of food commodities naturally felt the influence of better times most strongly. Moreover a growing appetite for sugar by peoples who in the past have used it sparingly, if at all, tended further to broaden the world market. Normally there has been an annual increase in sugar consumption of approximately 4% but carefully compiled and well verified figures show that the increase during the last year was at least three times as great. It is the concensus of authorities that the total distribution for consumption in all countries amounted to 24,000,000 tons. Full details of the statistics are not available but from those that are it is plainly evident that the above estimate is not an exaggeration. Willett & Gray's calculations make the consumption of all sugars in the United States for the period under review 5,510,060 tons, or at the rate of 1071⁄2 pounds per capita as against 4,854,479 tons in 1924, a capita rate of 95.90 pounds. This indicates a net increase of slightly more than 1312%. The same authorities estimate the total consumption of the United Kingdom and principal European countries as 5,496,721 tons, compared with 4,767,344 tons in 1924, an increase of 729,377 tons, representing a gain almost equal to that made in the United States.

Notwithstanding an increase in her own crops amounting very close to 2,000,000 tons practically all of which was absorbed by home consumption, Europe was a heavy importer of sugars from cane producing countries, thus adding another 2,000,000 tons to her supplies which included a carryover from 1924. Of the quantity imported by Europe Cuba furnished 1,137,924 tons, while to other foreign countries exclusive of Europe and the United States she exported 277,104 tons.

As late as last October, it was generally believed that at least 500,000 tons of the 1924-25 crop would be left in the island on December 31. It was to this wide-spread belief and high estimates of the coming world crops that the extreme weakness was due at that time. However, this indicated surplus was virtually wiped out in the last quarter of the year by an enlarged demand from everywhere, that had been incited by the abnormally low prices. The carry-over in Cuba was in reality but about 45,000 tons, or not enough to supply melting requirements at the United States Atlantic ports for one week.

Having early in the year reinstated a preferential duty of 4s3d per cwt, on her colonial sugars the United Kingdom thereby furnished an extra attraction to Australian, Mauritian, and British West Indian sugars, to the disadvantage of other markets notably India and Japan, that had been dependent in part upon these sources of supply. These British colonial sugars furthermore displaced Javas in the United Kingdom. However, a demand for the latter from British India, the only important cane sugar producing country to show a shortage in its crop, together with larger markets in Japan and China, took such good care of the Java output that comparatively little of it was left at the end of the year.

Although Cuban and other producers have profited little if at all from the year's results in their field and refiners' margins have been extremely narrow, the distributing trade in refined sugar have had a far more satisfactory experience than in the two years preceding 1924, notwithstanding a declining market. Sharing the bearish views promoted by huge production figures they were impelled even more strongly than before to limit their

purchases by a reasonable consideration of requirements for comparatively short periods. Nor were they induced to depart from this policy at such times as the market showed a tendency to advance. Therefore the successive declines in prices for granulated rarely if even caught them with an excess of supplies. They were thereby saved the considerable losses sustained in immediately preceding years, and for the most part found their business normally profitable.

Although the domestic beet sugar crop was the largest on record, having amounted to 974,185 tons, it was of comparatively little importance as a competitor with cane sugars in Eastern territory, owing to the good markets nearer home. In this connection it is interesting to note that under the protection of a high tariff the beet sugar industry of the United States has grown, according to Willett & Gray, from 1,861 tons in 1888, the year of its beginning, to its present magnitude. It was favored in 1924 by unusually good weather conditions as was the case in nearly if not all other sugar growing countries.

Another year of big world crops is in prospect. Cuba, if weather condi tions permit, is expected by leading trade authorities to produce between 5,270,000 and 5,290,000 tons in round numbers. A complete table, compiled by Willett & Gray, the authorities most relied upon by the trade and hence most frequently quoted, indicates a total world production in the 1925-26 season of 24,398,214 tons or 794,011 tons more than was made in 1924-25. Should there be no increases of consumption over that of the past year and the total outturn equals these figures, there will be nothing to speak of to carry over at the end of 1926.

The close balance of supply and demand in 1925 has brought sugar into more favor with speculative traders and this is perhaps best shown by the premium on the distant over the near months in the sugar futures market. Last year the reverse was the case. The course of prices, however, must continue to depend upon supply and demand. It can scarcely be expected that the universally favorable weather conditions for production that prevailed in 1925 will be repeated this year, and there is a probability that early crop estimates may therefore have to be reduced later. The rainfall in Cuba last fall, the season when it is most needed, was much below normal although this was partly offset by copious rains in January, 1926.

That Cuba is hopeful of obtaining an average price for her crop that will insure at least a reasonable profit, is shown by an evident purpose not to push her sugars for sale faster than the market is ready to absorb them. On the other hand, an effort to advance prices to or above the level of 1924 may well result in sharp curtailment of consumption which owes much of its phenominal growth in the past year to its low cost to the consumer.