Ths Turmoil in World Commodity Prices

a 'Sunday Times' analysis On larch 20th, the Sunday Times Business Supplement carried the following article: "Connodities - the business man's portmanteau word for goods as varied as copper, wolfram, wooltops, zinc, copra and peanuts — are the lifeblood of British industry. ... At least one eighth of the goods flowing into British ports come into this category. This means £600 millions worth or more, excluding oil and other near-commodities. And when prices move up 10% or so, as they have over the past year, £60 million or wre is added not only to Britain's import bill, but also to industrial costs. ‘On an international scale, this is insignificant as Britain's trading competitors have to pay the higher prises too. But it is a detectable burden on company profits — even when it can be offset by clever trading in the commodity markets. Yet for two main reasons Britain has no special interest in lower world prices for commodities. The first is very straigtforward: although Britain is a net importer of commodities, and a very heavy one, the sterling area as 4 whole is a small net exporter. A fall in the world price of copper or tin or ground nuts helps both internal costs and, initially, Britain's own balance of trade. But its effect on the sterling area's balance of paynents is adverse. ‘for this reason alone, it is not in Britain's interest to seek lower world primary product prices. But the second reason may, in the long run, be even more cogent. Just as about one eighth of Britain's imports consists of commodities, about one sighth of our exports go to the under developed countries which, by and large, are the commodity producers. Their own finances are strained at the best of times, and lower prices for their exports are inevitably followed by import stringency. But if industrial~ isation programmes are to go ahead, capital goods imports must keep on flowing. The result: the primary producing nations turn to aid-conscious suppliers, accepting the trading or political strings that necessarily follow. Although these young states may not now offer great trade opportunities, they are the growth markets of the future. Once lost, they are hard to regain. "So Britain finds itself in e dilemma. On the one hand, the constant cry from Africa and elsewhere for high commodity prices must be resisted, because of the effect on industrial costs at home. At the same time, we don't want to sce prices falling, because of the longterm effects on our exports, and the shorter term effect on sterling area trade balances. Somewhere between the two lies, from a strictly business point of view, the ideal position. But this is exactly what we have not got. "In fact, the world's primary product zarkets are in a turmoil. In some commodities, price support or price restraint aggeements are breaking down in the face of rapid technological change. Crop failures and diseases are hitting others. Comuodity prices have seesawed sickeningly in the past two years. "Naturally, some sfforts are afoot to bring some order to this anarchic world. But the problem of enforcing agreements remains a key to the situation, while even the best arrangements can be sabotaged by labour disputes, transport difficulties or crop failures."