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Wednesday, 25 June 1930

Senator CHAPMAN - I have not the exact date, but it was received quite recently. The Regina Board of Trade, a body corresponding to our Chambers of Commerce, recently appointed a special committee to investigate the grain situation, and the committee made the following statement regarding the Canadian wheat pool : -

In view of certain criticism of the marketing operations of the wheat pool, we feel that it is in the public interest . to state our conviction that from all the information supplied, the pool is functioning normally and carrying out the orderly marketing for which it was brought into existence, and that the present condition is attributable to other causes, including the stock market collapse, and liquidation of huge speculative holdings, aggravated by the failure of certain large brokerage houses and the dumping of large quantities of wheat on the market. The statistical situation points to the wisdom of the pool policy of refraining from dumping wheat on the market.

A resolution endorsing the report of the committee and re-affirming its faith in the directorate of the pool was passed unanimously by the Regina Board of Trade at a general meeting on the 7th February, 1930. In the United States of America also legislative action has been taken. A huge fund has been provided to prevent a collapse of prices. The functions of the Farm Loan Board of the United States of America were outlined recently in a very interesting statement by the chairman of the board. He said -

The Farm Loan Board has extensively financed large holdings of wheat, and has itself bought surpluses off the market. Generallyspeaking, the policy of the board has been to enable growers to get a stable price internally.

Lastly, in regard to the Canadian pool, I have an official statement,, dated the 7th February, 1930, which sets out very clearly the position and objectives of the pool. It is as follows: -

Winnipeg, 7th February, 1930.

During the last few days there has been a great deal of comment concerning the wheat pools in Canada; our position, the wheat situation, financial matters and the troubles of Canadian stock-brokers have been so intermingled under startling newspaper headings that the general public may have a confused idea of the present position of the wheat pool.

In order to make' our members in the country fully aware of the facts, we are now giving a summary of our present position with reference to recent action of the provincial governments.

As a background, it should be stated that the Canadian wheat pool, as an organization acting in the interests of the producers, is convinced that prices quoted for wheat at present are below a fair valuation of the wheat and not a just return to the producer. ' It should be distinctly understood, however, that the pool is not following a policy of attempting to hold up supplies of wheat. We are still following the same basic marketing policy of previous years, of always offering to sell when there is an actual demand for wheat. While we have not been selling substantial quantities at the present low levels, we have been offering wheat to foreign buyers and domestic mills consistently throughout the present crop season.

Factors in Situation.

A number of factors have entered to cause the present depression of wheat prices, notably the huge carry-over of last year's wheat, the unbridled dumping of Argentine wheat on the European market, and just recently the unstable financial situation resulting from governmental investigations of the brokerage business in Canada. The wheat pool has fortunately been in a position to avoid liquidating its wheat upon an unfavorable market. In order to do this and at the same time pay pool members for this year's crop on the basis of one dollar . for No. 1 Northern, we have naturally had to borrow heavily from the banks. The banks have always loaned on the security of our wheat in store. The basis of these loans requires that the value of our wheat security shall always be 15 per cent, greater than the amount of money advanced by the banks. We have always maintained this margin of safety and are doing so to-day.

During the past ten days an element of uncertainty and weakness has been introduced into the financial situation in ' Canada as result of some of the provincial governments seizing the accounts and books of certain stock and grain brokerage firms.

Some of these brokerage houses are carrying large, speculative grain accounts on behalf of clients, accounts based on margin payments only. The wheat market reflected the disturbing situation in the brokerage business and wheat prices were unable to pull themselves up to: better levels. There was a possibility of speculative margin-holders of wheat being sold at any minute, which would involve the dumping, on an already weak market, of millions of bushels.

To prevent such an unfortunate occurrence, the Governments of the various provinces considered the release of these accounts from, the - general seizure, so that the margin accounts of wheat speculators could be negotiated in the customary way. This was done.

Action of Banks and Governments.

At this time the Canadian banks became, concerned. They sensed a danger of wheat prices being forced down still lower as a result of the general unrest, and feared that the wheat pool margin of 15 per cent, might be impaired; accordingly the banks, called upon the pools to take some action to insure the maintenance of the margin. [Extension of time ' granted.'] I ask leave to continue my remarks to-morrow. Leave granted; debate adjourned. .

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