634 



THE INDIA RUBBER WORLD 



[August 1, 1916. 



48,959, Garter. 

 :lock-Ci 

 both 



ited St: 



Rubber Co.— 



McNaull Auto Tii 



48,991. 

 49,211. 

 49.213. 



49,283. 



49,296. 



Comb. G. D. Harper, Minneapolis, Minn. 



Tire tread. \V. n McXaull, assignor to ' 

 Co.— both of Toledo. Ohio. 



Automobile tire. W. A. Robbins, Glen Ridge, N. J. 



Resilient tire, IT. H. Hewitt, Buffalo, N. Y. 



Rubber tire \" P Tackson, assignor to Globe Rubber Tire Manu- 

 facturing Co., Inc.— both of Trenton, N. J. 



Rubber tire. M. W. Roe. assignor to The McGraw Tire & Rubber 

 Co.— both of East Palentine, Ohio. 



Tire tread. O. Rr.iunwarth, New York City. 



HOW SHOULD RUBBER BE SOLD? 



UNDER this title our English contemporary, "The India Rub- 

 ber Journal," publishes a very interesting and timely article 

 by W. F. de Bois Maclaren, the well-known rubber plantation 

 agent. 



After reviewing the situation of the crude rubber market in 

 England and on the continent of Europe before the war, and 

 comparing it with present conditions, Mr. Maclaren proposes 

 forward sales contracts, on a sliding scale plan, as a means of 

 protecting producers from too low returns for their rubber. 



Prior to the war most of the crude rubber marketed in Eng- 

 land was sold at public auctions, where, according to Mr. Mac- 

 laren, it was recklessly sacrificed at the rate of as many lots 

 per minute as possible, for whatever bids rubber dealers chose 

 to offer. Rarely was there any strong competition to secure 

 lots. 



On the Continent, sales were chiefly made by sealed tenders, 

 the highest bidder always being declared the purchaser. This 

 means of sale was always strongly opposed by rubber brokers in 

 England, who maintained that the public auction was best in the 

 interests of the owners as well as most convenient for buyers. 

 To this system Mr. Maclaren lays the fact that first late.x rubber 

 was sold as low as \s. lOrf. [44 cents] per pound in London in 

 1913. 



When the war came, public auctions had to be abandoned and 

 sales by negotiation through brokers took their place. These 

 sales have been recognized to be so much more satisfactory in 

 their results that it is not likely that the auctions will ever again 

 be revived. 



Mr. Maclaren holds that the rubber plantation industry is, 

 however, still too largely at the mercy of dealers and speculators 

 in rubber, which fact, he claims, is to a large extent concealed 

 by the extraordinary demand for rubber in the United States 

 and the increased consumption in England. Given a period of 



temporarily restricted trade, together with large and increasing 

 arrivals of crude rubber, the same conditions would be repeated, 

 unfavorable to the rubber planters. 



SALES BY FORWARD CONTRACT. 

 As a reniedy against this, Mr. Maclaren proposes the develop- 

 ment and popularizing of the system of selling forward. He 

 argues that : 



Sales by forward contract are not new in the crude rubber 

 trade, and they have done much for the rubber plantation indus- 

 try. The chief benefit derived from such forward sales is that 

 the amount of unsold rubber arriving on the market at any 

 one time is restricted, and thus the demand for what is left is 

 stronger than it otherwise would be. The larger the unsold ton- 

 nage on the market at any time, the greater the opportunity of 

 the dealers and .speculators to make large profits at the expense 

 of the producers by breaking down the price. 

 RISKS OF FORWARD SALES. 



Directors and commercial agents of rubber companies are not 

 always ready sellers. Quite a large number of rubber companies 

 sell no rubber forward and many others sell only the most 

 meager portions of their total output. Yet these companies 

 derive benefits from the sales made by the more public-spirited 

 companies, and on occasion are able to boast that they have 

 obtained a higher average price for their crops. The rubber 

 market is so speculative that no one, however intelligent or well 

 informed, can forecast its course with certainty. A forward sale, 

 while insuring a certain profit on the portion of the crop sold, 

 luay be the means of depriving the company of a further con- 

 siderable profit which it would otherwise have obtained. 



Another aspect of the case is that it is sometimes the buyer 

 forward who sutifers severely. 



PROPOSES SLIDING SCALE. 



To the end that neither the seller nor the buyer be heavily 

 penalized as the result of having entered into a forward sale 

 contract, Mr. Maclaren proposes the adoption of a sliding scale 

 in all such contracts. He takes a suppositious case as example: 



A enters into a contract to sell forward to B three tons of 

 crude rubber per month during a period extending from Janu- 

 ary to December, 1917, at 3.f. 2d. per pound. In this supposed 

 case one of two things is likely to happen. The market price 

 may rise considerably and the seller regret the sale or, on the 

 other hand, it might fall considerably and the purchaser suffer 

 heavily financially on account of his purchase. In either case 

 the result is more or less bad from the point of view of those 

 interested in maintaining sound market conditions. With a 

 sliding scale clause, such as is frequently inserted in forward 

 sale contracts for very large amounts in the base metal trade, 

 this would not have happened. 



The working out of this suppositious contract the writer ex- 

 plains as follows : 



Let it be imagined that during 1917 an average price of 4s. 2d. 

 instead of .V. 2d. ruled for first grade latex rubber. In this 

 case, instead of suffering an apparent loss of one shilling per 

 pound on 36 tons sold forward, of which amount the market 

 was relieved, half of the rise would be paid to the seller \yho 

 had assisted in bringing about the improved market condition. 

 The seller would thus get an average price of 3s. Sd. per 

 pound. . . . Or, on the other hand, if there was a heavy 

 fall in the price of rubber and the average for the year was 

 2s. 2d. instead' of 3s. 2d.— the rate at which the forward contract 

 was made — the loss would be shared. Instead of 3s. 2d., the 

 seller would receive an average price of 2s. Sd., which would be 

 6d. more per pound than the average price for the year. 



Mr. Maclaren argues that both the buyers and the sellers 

 would run far smaller risks under such contracts than they do 

 under present conditions, and consequently would be disposed 

 to transact the bulk of their business on these safe, conservative 

 lines. Further, the reduced quantities of spot rubber that would 

 be on sale at any period would prevent dealers and speculators 

 from making profits that are detrimental to the crude rubber 

 producer. The result would be more stable market conditions 

 and probably generally higher prices. 



