Some truths about WHEAT

“No worse policy can be imagined than the continuance of wild and unreasoned statements that there is too much wheat.... limitation of production may end in a serious shock to modern civilization”

W. W. SWANSON June 15 1931

Some truths about WHEAT

“No worse policy can be imagined than the continuance of wild and unreasoned statements that there is too much wheat.... limitation of production may end in a serious shock to modern civilization”

W. W. SWANSON June 15 1931

Some truths about WHEAT

W. W. SWANSON

Professor of Economics, University of Saskatchewan

“No worse policy can be imagined than the continuance of wild and unreasoned statements that there is too much wheat.... limitation of production may end in a serious shock to modern civilization”

WHEAT is getting more attention at the moment than is usual in our modern civilization, which has for many years treated food as something which farmers produced for other people to eat, and usually wanted too high a price for. The reason for the change of outlook is quite obvious. Commencing in the crop season of 1929, the flow of the wheat of Western Canada to its accustomed markets was checked; railway revenues began to fall; farmers slowed up their purchasing; and general business felt the effect.

For some time it was assumed that the machinations of a wicked organization called the Pool were wholly responsible for the trouble. Demagogues, we were told, had captured the support of the farmer; old and tried methods of marketing were being abandoned; and a desperate attempt was being made to exploit the British consumer, which could only end in disaster.

It is not the purpose of this article to delve into that controversy, which was never quite clearly understood by the public at large. Let us, if you wish, accept as true everything said about the Pool; and then let us forget it, for it has since become amply evident that there must be other troubles in the world’s wheat markets. Since 1929, Argentina, which was supposed to be a community of people so wise and farseeing that they avoided the errors of Canada and assured themselves of a preferred place in the

world market, has had a revolution and is not a bit less dissatisfied than is Western Canada with present wheat prices. Australia has met writh serious economic reverses; and every wheat-producing country in Europe has something approaching an agrarian crisis on its hands. *

Wheat has fallen to prices lower than have been known in a century, and seems unable to recover.

It is by degrees coming to be realized that at least some of this has been caused by a general financial and economic depression the world over. But wheat has suffered in the general smash of prices more than any other commodity except sugar; and, especially when we remember its position in the commerce of Canada, it is not to be wondered at that Canadians are prone to assume that wheat is the cause of the depression and not its victim.

Even if the fallacy of this idea is realized, it still remains a fact that, whatever the cause, wheat is, over all the world, selling at a price which leaves the producer bitterly discontented, and that, whatever the cause and the cure of the general fall in prices, no result is more serious than the enormous shrinkage in the exchange value of the world’s chief cereal.

In the circumstances, every statistician has sharpened his pencil and proceeded to immerse himself in voluminous

masses of figures, showing precisely why wheat should be selling at present prices. A few—a very few—believe, as a result of their researches, that wheat is no special object for the forces that tend to pull world price levels down, but suffers more, and more immediately, than other commodities simply because of its world-wide production, its worldwide markets, and the fact that those who grow it are, as a world-scattered community of individual capitalists and workers, less able to co-operate for their common benefit than the producers of many other commodities and services. On the whole, however, the statisticians seem to arrive at the conclusion that, however much wheat markets have been affected by general economic conditions, they must be touched also by influences special in type and confined to the markets for wheat alone.

Exploring further, many of them—certainly a majority, and probably an overwhelming one—find evidence of serious overproduction of wheat, of unwise efforts of farmers to expand their acreage, and of a simultaneous dual tendency on the part of consumers to turn from wheat to other foodstuffs, and to reflect present lowered purchasing power in lessened buying of wheat.

Misleading Statistics

IT IS a surprise to many whose study of world wheat production and consumption goes back farther tiran 1929 to see how easy it is for someone who has statistical skill and access to the necessary figures to prepare a ‘‘Report on the World Wheat Situation,” and to have it accepted as authoritative because it gives correct figures of world production, stocks and movement.

The situation does not seem to seasoned students quite so simple as all that. For example, it is easy to say that Germany has increased her acreage of winter wheat as between 1929 and 1930 by 6.9 per cent. To deduce from that, however, where the Reich will stand as a consumer of imported grain is not quite safe; certainly not safe at all

unless simultaneous consideration is given to the fact that the German acreage of winter rye has in the same period dropped by 9.6 per cent, or enough, when acreage of the two grains is weighed, to more than twice compensate for the increase in wheat sowing, if yields in 1931 pier acre are reasonably close to the average.

Similarly, it is easy to add into the world’s wheat supply the ten million acres by which Russia is to increase her crop this year, but one should not forget that a wholly unpredictable variation in yield per acre, well within experience of the past in that country, may make the Russian crop of 1931 seven hundred and fifty million bushels or a billion and a quarter, and that the spread between these two extremes represents as much as the whole world’s present visible supply of wheat.

Nor yet is it possible to say how the market will be affected by a possible release for sale of the holdings of the United States Farm Board, amounting to perhap>s two hundred million bushels. The corn crop of the republic last year fell sue hundred million bushels below the previous season; and although it is true that the movement to have wheat substituted for com in feeding hogs and steers was not markedly successful, any failure to do this must in the end only mean that much ultimate lessening of the production of foods of animal origin—which are always competitors of breadstuffs in the world’s diet.

These instances of the complexities which affect the relation of demand and supply in the wheat market might be multiplied. The whole question is perhaps the most intricate that any statistician can attack, and no one can hope to give at any moment an analysis of it that is more than an informed guess; the degree to which it is informed depending on the guesser’s general knowledge of a subject which has ramifications extending into sociology, rural economics, politics, world finance and even religion.

The world wheat situation is almost the same thing as the situation concerning modern society in its relation to the forces which tend to support or destroy it, and is not a simple study in statistics.

Lessening of Acreage

AFTER such a criticism of

many present statistical efforts,, it may seem egotistical to survey even a pxirtion of the field which it has been averred is. as a whole, beyond the scop>e of man’s vision. The author wishes to record the entire inadequacy of his equipment for that task, and to impress on his readers that he is not attempting to lay down final facts or to enunciate great principles, but is merely assembling a few data, in a necessarily general fashion, and trying to indicate some of the conclusions which might arise from them.

To commence, he has tried to approach the problem in a logical manner by dividing his subject into three main parts: (a) the p>art that the producer can play, and is playing, in adding to the world’s supply of its chief grain;

(b) the p>art that uncontrollable forces of nature play; and (c) the part played by the consumer.

He has made his comparisons as between the crop year just closing and that of 1922-23, electing these dates because the period included covers exactly the time during which so many observers assert they can trace a rising trend in production, which has ended in a present disastrous condition of oversupplied markets.

The farmer, of course, can do but two things in relation to the production of wheat. He can plough and sow a given number of acres, and he can vary the skill of his practice. Both of these play a part in the resulting crop, but some knowledge of general trends in world fanning practice leads the writer to assume that, within the short period under examination, no weight need be given to any alteration in fanning methods because they were not

important enough to affect significantly the world's produc-

tion of grain. Consequently, he has treated the increase or decrease of acreage sown as the sole contribution of the grower to any present world surplus of wheat.

Dividing the wheat-producing areas of the world into convenient units, we obtain the following figures, showing the increase or decrease of acreage sown in each unit between August 1, 1922, and July 31, 1923, as compared with the same period of 1929-1930. Excluding Russia and China, for reasons given later, and using figures covering some ninety per cent of the rest of the world, we learn that:

Countries in Europe and the Mediterranean area, w'hich are normal importers of wheat, increased their acreage 5.6 per cent. Normally exporting countries in the same area increased their acreage twenty-one per cent. Argentina increased its acreage twenty-five per cent. Canada showed an increase of thirteen per cent; Australia ninety per cent; and India 1.6 per cent; while the United States acreage was decreased one per cent.

The resulting increase of acreage in all the countries under consideration, covering ninety per cent of the acreage of the world, excluding China and Russia, was 11.5 per cent.

Each area, of course, plays a part in world production in proportion to its acreage; and, examining the figures in this light, we find, assuming yield per acre to be uniform, that the importing countries, as above, added 1.04 to world production; exporting countries, as above, 2.44 per cent; Argentina 2.07 per cent; Australia 4.33 per cent; Canada 1.51 per cent; India .25 per cent; while the United States would lessen it by*.25 per cent.

Of course, actual increase in world production resulting from this added acreage was not in direct proportion to these figures. Causes entirely beyond human control

interfere. The average acre of wheat in Western Canada, for example, added to the world’s supply almost twice as much in 1928 as in 1929 because of more moisture. What these figures indicate is man’s attempt to add to production;

Australia, as between 1923 and 1930 endeavoring to increase the production of ninety per cent of the world by no less than 4.33 per cent.

In 1930 this movement to increase acreage seems to have reached its peak. Most of the 1931 world crop is already sown, as winter wheat, in Europe, North Africa, and the United States. Full reports are not available, but figures from one third of the normal acreage of Europe and the Mediterranean area (excluding Russia) show a decline as compared with the previous season from 19,038,000 to 17,388,000—decreases, especially in Rumania and North Africa, more than compensating for increases, in Germany and some other countries. In the United States, winter wheat acreage is down from 43,690,000 to 42,042,000.

It is too early yet to forecast safely the acreage trend in the spring wheat areas of Canada and the United States, but it is to be taken for granted that, under present conditions, there will be some shrinkage, especially in sowing on stubble, where yields are uncertain. Similarly, no exact figures are available for sowing of the crop in Australia and Argentina during May, June and July, but economic stresses in those countries lead to a belief that there will be a decided lessening of acreage, and this is confirmed by preliminary estimates of thirty per cent reduction in Australia, and fifteen to twenty per cent in Argentina.

Russia’s Experiment

SO FAR these figures have excluded Russia and China;

that custom in wheat statistical work being due wholly to lack of dependable information. In the case of China the condition does not improve, and all that can be said is that there is no immediate indication of the great floods of wheat which are sometimes asserted to be coming from Manchuria, while on the other hand, unless some change occurs in the silver situation, China cannot be regarded as likely to be a much greater importer in the near future.

The case of Russia, however, is different. It would be going far beyond the bounds of the present survey to attempt any forecast of the outcome of the great sociological experiment in the Soviet State, and it is not even possible, as yet, to place implicit trust in the franknps and accuracy of statistics issued at Moscow. It will be necessary, for the purposes of this study, to accept such figures with the emphatic mental comment that no one, and perhaps least of all Mr. Stalin, knows how good are his chances of implementing his announced plans.

Russia became an exporter of wheat on a large scale in 1930, for the first time since the war. In that year the acreage rea pled was slightly under fifty-nine million, while plans—confirmed, it is alleged, by actual performance in the sowing of winter grain—are for an increase of ten million acres in this season.

If we include Russia, world acreage excluding China becomes somewhat over three hundred million, and ten million would add 3.3 per cent to that. In simple words, Russia promises, in the third of her famous Five Years, to increase world acreage a little more than Australia did between 1923 and 1930, and not much more than twice as much as the Island Continent added to its wheat area last year, when acreage went up from fourteen to eighteen millions.

It is, of course, necessary to remember that the type of soil sown in Russia and the conditions of humidity will perhaps make the new acres there more effective in increasing supply than was the case in Australia, there does not seem to be any

although

great difference in this regard, as the new acreage of the Soviet is in general on

In short, there seems reason to expect that Russian acreage increase will no more than compensate for reduction

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Some Truths About Wheat

Continued from page 4

in other countries, if it accomplishes that. The further implications of this apparent economic success of the Soviet are important, but not within the scope of this article.

So much for what man has done in recent years, and is still doing, to alter the relation of the world’s wheat supply to demand. We might easily wander far in this field— refer to the acknowledged signs of a shrinkage in winter rye sowings in Europe, including Russia, and to other factors, but it is impossible to examine in detail the whole problem. Let us turn now to the part played by Nature.

Nature Decides

TF WE examine the average yield per acre

of the world, excluding Russia and China, we note that in the four years 1923, 1924, 1925 and 1926, world per acre yield fell below the average for the next four years by .26 bushel. We note also that world yield varied, even in this short period, by almost two bushels per acre. Such a variation, applied to total acreage, excluding China, would make a difference between two seasons’ crops of almost six hundred million bushels—more than the world’s present visible supply.

Consider the implications of this fact. It means that no human brain can forecast, and no human hand avert, such a variation in world production of wheat as to outweigh by far any conceivable addition to, or subtraction from, world supply that might be arranged by any imaginable international pact.

Were a conference such as that recently held at Rome to agree on a general reduction of acreage in every country in the world, a few inches more rain this summer might nullify the effect, or a few less leave the world’s reserves of wheat exhausted.

As to action of any individual nation, just reflect that the effect on world supply of such a variation in yield per acre as occurred between 1924 and 1928 would be twice as important as the decision of the United States to, or not to, re-enter the export market; three times as great as the volume of wheat which Russia, judging by last year’s figures may expect to sell abroad this year; and as great as the failure of Canada to produce a grain of wheat in her greatest crop year.

The other point—the increased average yield in the four most recent years as compared with the four previous—is also important. It might be given its due weight by imagining a world conference in the late summer of 1926 to plan some system of adjusting world wheat production to demand. Had a committee of such a conference decided to limit world sowing to an acreage which, assuming yields in the next four years to be equal to those of the preceding four, would provide for a known consumption such as has occurred, the acreage decided ujx>n would have been no less in the next four years than was actually sown.

The variation of .26 bushel per acre when applied to world acreage—excluding Russia and China—would mean some two hundred and fifty million bushels in four years. Had production per acre 1927 to 1930 been what it was between 1923 and 1926, and had consumption taken place on the scale actually reached, there would be no surplus of wheat today, but a bare working

stock. For the five years before 1928. when we had heard nothing of overproduction, world visible supply on the first of each year was some three hundred and thirteen bushels. Today it is about two hundred and sixty million bushels more—or almost exactly the amount added by an unforeseen and unforeseeable bounty of Nature.

(Please note that figures on world acreage and production from various authorities differ. Those used are from standard and respected sources.)

This is all the merest speculation, but it should go far to show that the theory that the farmers of the world have proceeded blindly along a course of absurd increase in acreage has not the slightest basis in fact, and equally, to indicate that any combination of human wisdom and authority which may be used to adjust world wheat acreage to future demand is wholly unable to accomplish its objects, unless nature is to be far more amenable to human wishes in the future than has been the case in the past.

World Food Customs

NEXT, we are told that the great consuming public has definitely altered its diet, that wheat is no longer the important part of the world’s food that it once was, and that farmers must face that fact. Figures of doubtful precision but of admitted general accuracy, show clearly that there has been a per capita reduction in the consumption of wheat in recent years, especially in the more advanced industrial countries. To deduce from that single fact that a permanent change in world food customs has occurred is going too far.

It is well known that wheat, even at prices such as have prevailed in recent years, is the most economical of human foods; and the switch to other foodstuffs, to meats and dairy products, to green vegetables and sugar, has no surprise for anyone who realizes how much the standards of living in Western Europe and North America, for example, have improved as between pre-war and present times. In countries like China, on a bare existence level of food consumption, increase in the standard of living would probably not do anything to lower total consumption of cereals, but would produce additions of other foodstuffs to a present wholly insufficient diet. But in Belgium, France, Britain and Germany, men and women before the war were already well fed, if with too little variety of diet. The admitted, if perhaps economically unjustified, increase in general standards of comfort in the past decade in such countries logically brings with it a trend to a lessened proportion of cereals in the diet. To prophesy continuance of such a trend is to assume too much from the data available.

The writer of this article frankly denies his ability to forecast future trends of the world’s wheat supply and demand. He has attempted to show a correct picture of some facts that are today generally distorted in the public mind. He cannot, in a short survey, deal with many of the complexities of the situation. For example, we can only take world figures and treat them as though the world's wheat market were free and without local frictions, which is not the case. To add a thousand acres to the production of wheat in one country will not have the same market effect as though the addition were in another area. For one thing, trade customs are hard to change. Were Spain to have a larger crop in 1931 than proved sufficient to meet Spanish needs in 1930, that would not necessarily mean the export of the difference. Spanish society is largely rural, and in such a milieu increase or decrease in production of a staple food is reflected in increased or decreased local consumption rather than in exports or imports, as in the case of a country like

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Canada. This is only one of many factors too complex to weigh readily.

General economic and financial conditions will affect both the price and the consumption of every staple foodstuff, and it is not easy to forecast even the direction of the effect, not to speak of its intensity.

Lower Production is Dangerous

ALL that the writer can say is that the 4*present almost universal belief that the world is suffering from the consequences of a long period of foolish overproduction of mankind’s chief food is based on misconceptions, and may have the most dangerous results. At the recent wheat conference at Rome the distinguished English economist, Sir Daniel Hall, has stood almost alone in his opposition to this theory—but he is entirely right.

There is too much wheat on the world’s market at the moment, and it is small comfort to distressed farmers to tell them that the situation is probably a very temporary one, but it is far better than to preach limitation of production, which may end in the most serious shock to modern civilization. The future of the wheat market will depend on the complex play of many forces; on the general commodity price level, on the success of a most intricate and dangerous experiment in Russia, on consumption trends whose very direction cannot be safely forecast, and, far the most important factor of all, on the amount of rain which falls on three hundred million acres of wheat during the next few months.

Its present depressed position is the result of many things; of a general fall in com-

modity prices, of a thousand and one factors of public policy and public psychology. It does not reflect an}' serious error in the direction of overproduction—as far as man has contributed to that. It does reflect, more by far than anything else, an unforeseen and unforeseeable fact—a world production per acre in 1928 which was abnormally large, and the effect of which is still seen in overflowing granaries throughout the world.

In the end, wise men will come to see that experience is still the best of guides. The human race, over five thousand years of recorded history, has struggled vainly to produce enough food to keep human beings full fed—and has never succeeded. If, in a moment of unusual generosity, Nature has added a temporary surplus to man’s provision of bread; and if, as a result, men and women suffer, then the cause and the cure are not to be found by superficial examination of a few tables of figures, but by deep exploration of the fundamental defects that must exist in our system of exchange.

It will take a long time, much co-operation of diverse interests, and all the wisdom of m..n to correct any such defects. Meanwhile, society as we have it is still dependent on food, and no worse policy can be imagined for those who wish to maintain the present system as well as for those who seek to improve it, than continuance of wild and unreasoned statements which tend to keep fixed the idea that there is too much wheat, and thus to keep depressed the price of what is at the same time the chief commodity of the commerce on which the modem world depends for life, and also the basic biological need of human life.