Foreign Relations of the United States, Diplomatic Papers, 1933, General, Volume I

561.311F1/124: Telegram

The Chairman of the American Delegation to the Monetary and Economic Conference (Hull) to the Acting Secretary of State

London, June 30, 1933—7 p.m.
[Received 10:43 p.m.]

82. For Wallace from Morgenthau. The experts of Canada, Australia and the United States prepared the following statement as basis for discussion at today’s meeting:

“The world wheat situation has altered to so considerable an extent since the discussions between the four overseas exporting countries commenced that it is necessary to restate the position. The basis of any plan agreed to between the overseas exporting countries is to bring about an adjustment of production so as to allow of the liquidation of existing surplus stocks within period of 2 years. The following data represent the best available indication of the present position:

(a) World import demand in 1933–34 is assumed to be 750 million bushels, but this figure may vary by 50 million bushels up or down.

(b) Exports from new crops in 1933–34 are estimated at: Canada crop from 375 to 400, say 400, domestic requirements 117 exportable surplus new wheat 283.

Argentina—no crop estimate available. Estimate based on average acreage from 1931 to 1933 (20 taken should be 19) and average yield from 1930 to 1932. Crop 240, domestic requirements 90, exportable surplus 150.

Australia—basis for estimate same as for Argentina. Crop 192, domestic requirements 50, exportable surplus [142].

The position in regard to new export wheat may therefore be stated as follows; Canada 283, Argentina 150, Australia 142, other exporters 75, making a sub-total of 650. The residual exports after allowing for the marketing of new wheat are consequently 100, which may, however, vary upwards or downwards by 50 according to the variation of the requirements of the importing countries and production in the other exporting countries. The United States 1933–34 crop is estimated at from 520 to 575, say 540 and the United States domestic requirements at 610, leaving a deficiency of 70. The above estimates allow of the following method of dealing with the 1933–34 situation;

(a) Exports quotas are allotted to deal with new wheat.

(b) The United States surplus stocks are established at 240, and Canada at 140. The United States 1933–34 deficiency of 70 will reduce its surplus to 170. To bring about equality between the surplus of the United States and Canada an initial figure of 30,000,000 should be allotted to the United States.

(c) This leaves a remainder of 70, subject to considerable fluctuations up and down. This should be divided equally between the United States and Canada for the disposition of surplus stocks. This would give the United States a maximum of 65, Canada 318. The method of dealing with reductions in the world import requirements will be discussed in the next paragraph. It is felt that any increase in the possibilities of reduction of surplus due to failure of 1934 crops to reach the estimate of 541 for the United States and 400 for Canada, should be utilized by each country and that no attempt should be made to allocate such figures between the two countries. Any increase in the total export demand should be shared equally between the United States and Canada.

(d) If the world import demand were below 750, it is suggested that each of the four countries should share the necessary reduction of exports on a basis proportionate to their exports.

In the event of Australia or the Argentine not being able to fulfill their export surpluses in 1933–34, the difference between actual exports and export quotas shall be available upon the advice of the Advisory Committee, firstly to enable the whole of the new wheat of the 1933–34 crop to be marketed by an increase in the allocation to any country with a larger exportable surplus than provided for in the quota, and secondly insofar as such difference is not needed to care for new wheat to be equally divided between the United States and Canada for the disposal of surplus stocks. If either Australia or the Argentine thus surrenders a part of its export quota the quantity so surrendered shall be added to the export quota for the country for 1934–35. Beginning the second year of the scheme the surplus stock position will on the basis of the latter estimates total 210 equally divided [between] the United States and Canada. Since an essential part of any scheme must be effective cooperation of the European importing countries it is felt that even if higher prices cause some reduction of demand in the Far East yet total world import demand should be taken as 800 instead of 750.

Each of the four countries agree to bring into effect a reduction of production of wheat to the extent of 15 percent. The position of each country in 1934–35 is estimated to be as follows;

Australia—15,000,000 acres or average for 1931–33 at 12.8 or average yield for the seasons 1930–32 per acre equals 192 less 15 per cent 163.4 less domestic consumption 50 leaves an export quota 113.

Argentina—20,000,000 acres at 12 per acre estimated same basis as Australia equals 240 less 15 per cent equals 204 less domestic consumption of 90 equals export quota 114.

Canada—26.3 million acres estimate same basis as Argentina at 17.24 per acre 10–year average yield equals 453 less 15 per cent equals 380 less domestic consumption 117 equals export quota 263.

Other exporting countries 75. The total of the above allocations amount to; Australia 113, Argentina 114, Canada 26, other exporters 75, sub-total 566. The United States is estimated in 1934–35 to have the following position; 629 [million?] acres basis same as Canada at 13.110 year average equals 824 less 15 per cent equals 700 less domestic requirements 610 equals export quota of new wheat 90. The addition of the latter figure to the previous sub-total gives a new total export of new 1934–35 crop of 655,000,000 bushels. With the world import demand at 800,000,000 bushels this leaves a remainder of 143,000,000 bushels to be divided equally between the United States and Canada for disposal and surplus stocks. The deduction of 143 from the 210 surplus total at the beginning of 1934–35 leaves total of 65 or 33 in each country.

If world import demand were below 800 it is suggested that each of the four countries should share the necessary reduction of exports on a basis proportionate to their exports.”

This statement was fully covered in this morning’s meeting but no definite agreement was reached on figures or on the principle underlying allocation American Canadian export maxima. Bennett objected to 15 per cent acreage reduction on the ground that Bromley representing Prairie Provinces has strongly advised limiting reduction to 10 per cent in view of the difficulties in securing farmer acceptance of a higher figure as result of present increased prices. Morgenthau definitely objected to a 1–year reduction of less than 15 per cent on the ground that a smaller figure would not represent a serious effort to dispose of the surplus. When Australia, Argentina and the United States expressed their agreement with that figure Bennett finally agreed to cable to secure Canadian acceptance of 15 per cent. Bruce is cabling to Australia today the arrangement indicated in statement for the purpose of securing approval of state Premiers who are meeting July 1. In view of the fact that no agreement has been reached with respect to export quotas for the United States and Canada Bruce in his cable totaled the two under the term North American.

Presented your desire as per cable number 81 that there be unconditional agreement for first year of acreage reduction but other three delegates insisted on necessity of having some understanding with importing European countries and Russia before putting the plan into operation. You will note the plan as now set up involves 2 years of export quotas but 1 year of production reduction. Is it not advisable to secure some such immediate agreement and then refer to proposed standing committee the power to extend arrangement for another year if conditions at that time warrant?

Your cable number 81 last paragraph not clear. Advise promptly years to which figures refer. Would also appreciate your checking figures used above statement especially the consumption estimate for United States and new Canadian and American crops. [Morgenthau.]

Hull