76 



THE INDIA RUBBER WORLD 



[December i. 1909. 



Forward Sales of Plantation Rubber. 



THE subject of the forward selling of rubber, as now en- 

 gaged in by leading planting companies in Ceylon, has 

 been widely discussed in the press of that colony. The 

 practice and its possible results is one of widespread interest, as 

 having a hearing upon the question whether ultimately rubber 

 consumers may be able to depend upon covering their wants at 

 a fixed price for months or even a year ahead — something which 

 in the past never has been practicable. On this page appear 

 some extracts from The Times of Ceylon, published at Colombo. 

 First is a letter addressed to the editor, which is self explana- 

 tory ; it appeared in the issue of July 24 last : 



FORWARD SELLING OF RUBBER— ANOTHER COMPLAINT. 



Sib: I think it is high time that shareholders protested against 

 directors making forward contracts for the sale of companies' rubber 

 crops. What right have directors to speculate with shareholders' 

 property? For it is just as much speculation to sell, because you 

 think that prices may fall lower, as to buy because you think prices may 

 go up. The proof that it is not legal, or considered the correct thing, 

 is furnished by the fact that English companies don't dc it; and I 

 fancy that the directors of some of the Ceylon companies would find 

 themselves m a very awkward position if recalcitrant shareholders 

 took steps to enforce their directors making good the loss the com- 

 panies sustain by such forward sales. 



Buyers of rubber in large quantities would not be likely to enter 

 into these forward contracts unless they were pretty sure that the 

 prices were going to be higher, and I fancy American experts know 

 more about these things than Ceylon directors. Yours, etc., 



A Discontented Shareholder. 



Up-country, Tulv 23. 



* * * 



The next article appeared as the leading editorial in The 

 'I lines 0] ( eylon of October 1, being suggested by a letter from 

 New York which, while unsigned as it appeared in print, evi- 

 dently i-. from the leading American firm buying Ceylon rubber 

 en forward contracts. The article is given below in full, in- 

 cluding the New York letter referred to. 



* * * 



FORWARD SALES OF RUBBER. 

 LFROM THE CEYLON PAPER'S EDITORIAL.] 



We have received from the American firm whose Ceylon 

 agents. .Messrs. C. W. Mackie & Co., put through the contracts 

 for the sale of the 1910 crops of several Ceylon estates, an 

 interesting communication in reply to a letter, condemning for- 

 ward sales, which was published on July 24 in our columns. 

 The grievance of our correspondent was against the Ceylon 

 directors who made Icontrapts forward, and he questioned 

 whether they could not be compelled to make good to share- 

 holders any htsse-s which such forward selling might cause. He 

 contended that the fact that London did not go in for forward 

 contracts supported his opinion that it was not good business, 

 whilst lie thought that the purchaser of the crop forward was 

 hound to be satisfied that he was making a very good bargain. 

 The letter from the American buyer is as follows, name and 

 address being omitted : 



To the Editor. Times of Ceylon Dear Sir: Referring to the com- 

 plaint "i youi correspondent who, writing July 23 last, used the nom- 

 plume "A 1 iscortented Shareholder," I beg to state that purchasers 

 of next year's rubbei e been actuated mainly by the desire 



■ supplies. i li di muni appears to be in excess of the supply, 

 and New York houses have hrul the prudence to lay in stocks in time. 

 Ot course, in so doing they have had to take chances of decline in 

 the market, but thereby they have eased the risk of the planters. As 

 a matter of fact, the rubber has not been bought hy speculators to 

 hold, but has either been bought to cover sales actually made to manu- 

 facturers, or has at least been turned over to manufacturers imme- 

 diately after purchase, and that at a price just sufficient to clear 

 charges and give the purchaser a fair commission. As the larger part 

 of the American purchases of 1010 rubber has been made through ray 

 agency I am in a position t<> speak with some authority. At the same 

 time if planters will refuse to sell forward it will make business much 

 easier fur us. It is much easier to sell rubber for prompt shipment at 



market prices than to sell futures without knowing what will happen 

 in the commercial world in the meantime. 

 New York, September 2, 1909. 



This, so far as we are aware, is the first statement of the 

 situation from the point of view of the buyer of crops forward, 

 r.nd it is a thoroughly satisfactory and straightforward one. In 

 the United States, as well as in the United Kingdom and on the 

 Continent — because the sale of Ceylon rubber crops for 1910 

 has not been confined to one country — manufacturers have for 

 some months past had serious misgivings as to the supply of 

 rubber being equal to the demand in 1910, and they have accord- 

 ingly taken steps to guarantee their own needs being satisfied. 

 This explanation, we are quite well aware, will not be accept- 

 able to a good many people who are firmly convinced that 

 natural causes are playing a comparatively small part in the 

 present state of the rubber market, whilst speculation is the 

 principal factor. 



But. even allowing that far seeing operators on the rubber 

 market foresaw the possibilities that lay ahead when the United 

 States recovered from its financial prostration, and thus man- 

 aged to some extent to control the situation, there is still an 

 admitted shortage of available rubber, and the manufacturer 

 who takes the leng view and buys ahead can defend his action 

 by sound reasoning. They fully realize that there is a chance 

 ol the market being a cheaper one next year, but prefer to take 

 that risk and be sure of having the stock they require than to 

 stay with the market and stand what they consider to be a con- 

 siderably greater risk. 



The concluding sentences in the above letter point out the 

 risks which the buyer of forward crops runs, and there is a 

 curious suggestion that it is the wicked planter who is responsi- 

 ble for forward contracts, and that, if he would only refuse to 

 sell crops forward, the buyers of rubber would be delighted, as 

 they are not in love with "futures." 



* * * 



The "discontented shareholder" wrote again to the Times, 

 pi tinting out the difference between results of one company this 

 year and what they might have been, had not the company's 

 directors sold rubber ahead, instead of waiting to sell at current 

 prices. The final comment by the editor was : 



"That sellers of the crops did not do so badly is well brought 

 '■ut in our correspondent's argument, for his whole grievance 

 appears to be that one Ceylon company will only earn 100 per 

 cent for the year, instead of 150 per cent., upon which calami- 

 tous state of things it is clear that the shareholders are entitled 

 to our deepest sympathy." 



THE RIVAL RUBBER MARKETS. 



""THIS is from a leading article in The Times, of Ceylon: 

 •*• "Everything points to the rapid growth of the Colombo 

 rubber market, as the advantages on the side of selling in Co- 

 lombo are in many respects identical with the case of tea. 

 The claims of London in the matter have disappeared with her 

 monopoly of distribution. It is now accepted by a majority 

 of producers that they can get better prices for their tea in 

 Colombo, where it is brought on orders from London, Australia, 

 America, and Russia, than in London. Since rubber is already 

 being shipped direct to Antwerp and Xew York from Colombo 

 there is the same likelihood of a healthier competition here, 

 while the inconvenience and cost of transshipment and, above 

 all, the excessive agents' charges in London, are saved. For 

 the present the growth of the market has been arrested by the 

 large amount of forward selling on contract, but it is bound 



