811.24 Raw Materials/621: Telegram

The Secretary of State to the Chargé in the United Kingdom ( Johnson )

283. Your 387, February 14. This matter has been discussed in full with the Commodity Credit Corporation and the Army and Navy Munitions Board who approve the following position which you may communicate to the Ministry of Supply.

It is believed that a release of at least 80 percent for the second quarter is essential to allow the gradual reaccumulation of stocks in this country by commercial buying, in addition to delivery of agreement rubber. If such action is taken by the International Committee and if the British Government will support a quota for the third quarter sufficiently large to allow the continued gradual reaccumulation of stocks, this Government will be prepared to agree to an adjustment of the period of delivery of agreement rubber along the following lines:

1.
The rubber buyer should continue his present policy of buying as rapidly as possible consistent with the maintenance of the general stability of the market.
2.
It is anticipated that, with an 80-percent quota, the rubber buyer should be able to secure for delivery during the second quarter the bulk of the agreement rubber yet to be purchased, but if it becomes apparent later that the entire amount cannot be secured before the end of June without placing undue pressure on the market, then at such time the rubber buyer might announce that he would accept bids for delivery during the third quarter.
3.
In any event it is desired to secure as much rubber as possible during the second quarter and this Government would not wish to agree to a proportionate “spreading” of rubber purchases over the third quarter even though as suggested such action would have the advantage of tending to stabilize production.

In conversations regarding this matter the Embassy may wish to stress the anxiety of this Government to secure agreement rubber, and to encourage reaccumulation of commercial stocks, as rapidly as possible in view of uncertainties in the international situation and the present low level of stocks here. It is regretted that this anxiety makes it impossible to agree to the suggestion frequently put forward, especially on behalf of producers, that the buying of agreement rubber should be used as a sort of balance wheel to cushion the expected [Page 266] decline in world demand for rubber during the last half of this year.

For your own information the Department is convinced that Viles has been very conservative in his preliminary estimates of consumption requirements in this country during the third and fourth quarters and understands that he himself expects later to be able to raise this estimate very considerably. It is understood that the estimate reflects only the certain consumption requirements in this country irrespective of business conditions; an active trade demand here or orders from abroad would require additional supplies of crude rubber.

Hull