Evening star., 1939-08-21
Industry 10 Suffer
Little Inventory
Loss This Year
Profits Will Not Be Hit
By Repetitions Of 1887
And 1888 Troubles
BY JOSEPH H. MELHADO,

And 1888 Troubles
BY JOSEPH H. MELHADO,
Associate Editor Standard Statistic Co.
NEW YORK, Aug. 21.-American
industry so far this year has been
called upon to face no such inven-
tory losses as those which mate
rally reduced profits in late 1881
and the early part of 1898. The
more stable, although low price
structure of raw materials gener
ally has also tended to make il
possible to maintain satisfactory
profit margins.
All available evidence points to
continuation of a satisfactory COM
modify price structure. In most i'm
portant raw material markets ex-
cept for agricultural commodities
production is being held within rea-
sonable limits and improving de-
mand will mean a gradual firming
of the price structure. There is
nothing in the picture to indicate
such runaway markets as in early
1887, however. In the case of ag-
ricultural commodities, recent price
declines may we'll have discounted
the worst, and price changes over
the remainder of 1899 may be held
to small proportions.
1t has been demonstrated time
and again that. other factors be-
ing equal, industry fares best when
the trend of commodity prices is
close to the horizontal. Sharp in
creases may permit large specula-
tive profits, as goods which have
been fabricated out of lower cost
raw materials are sold on the basis
OF prevailing raw material mar
kets, and high prices. of course
widen profit margins of raw mate
rial producers. On the other hand
a sharp increase disrupts cost cal
culations and carries the inevitable
corollary of later equally abrupt
decline.
1887 Losses Recalled.
The evils of rapidly declining
price level need hardly be pointed
out. The 1887 experience, when
heavy inventory losses sharply re-
duced or wiped out operating profits
for rubber companies. textile manu-
facturers, metal fabricators and
other professors of raw materials, is
still fresh in mind.
In contrast to spread of 16
points between the early high and
the late-year low in the composite
commodity price index in 1897, the
Standard Statistics Co. index has
been moving within a three point
range for II months. Individual
commodities, OF course, have shown
sharper fluctuations, but in general
the raw materials of industry have
been showing slight upward trend
through the current year to date
and the only pronounced weakness
has been in agricultural commodi-
ties, the price trend of which af-
fects only relatively small segment
of industry.
Petroleum products have been one
exception to the generally favorable
commodity price trend. Despite in
creaslng consumption, prices have
weakened because of the lack of ef-
fectlve control of production, anc
profits of the industry will, in con.
sequence, make a poor showing.
Tire companies suffered severe in
ventory losses in 1887 and the first
half of 1888 as crude rubber prices
fell from q cents a pound in early
1887 to about 10 cents a year later
For some months now, however
prices have been stable at around II
cents. and the International Rubber
Regulation Committee appears tc
have firm grip on the situation.
Tin Prices Stabilized.
Tin is also subject to committee
control, and prices have been helc
in line fairly we'll. Sugar prices have
advanced in the world market as a
result OF agreement among pro-
ducers to control exports, and the
United States supply is subject tc
quota control by law. Sugar com.
panles, consequently, are making q
somewhat better showing. although
they can hardly be classed as pros
porous.
In the case of the leading non.
ferrous metals, supplies have beer
controlled by voluntary action O,
producers for the most part, al.
though copper production in mos
producing areas outside of the United
States and Canada is subject tt
regulation by cartel. In 1887 COD.
per hit high of II cents a pounc
early in the year and then slid of
abruptly to 10 cents, hitting a low
OF 8 in 1888. At that level, even tn,
loW-cost domestic producers coule
earn only small profits. This yea
prices have held at 10 cents or bet.
ter at all times; the high was III
and the current price is 1917 cents
This means fairly satisfactory profit
for at least lower-cost mining com
panies and no inventory losses fol
copper users. Lead and zinc price
have also been steady, with signs O.
flrmness recently.
The difficulties which the cottor
textile manufacturers have facee
this year have not been due in i'm
portant part to raw cotton pric,
trends. Cotton prices have held firm
because of the tight spot supply stu.
alton. in spite of the huge stock.
carried by the Government under
loan. The manufacturers troubl,
has been due to excessive production
OF cloth and to the bad competitiv,
conditions in the industry. SOM
attempt is being made to remed,
this through mill curtailment, bu
the industry has long been a sicl
one and seldom maintains profits q
satisfactory levels for any length o