Food/Volume 1/Chapter II

by R. J. Hammond

The Acquisition of Security Food Stocks

{{{1}}}

The setting up of the Food (Defence Plans) Department had been in line with previous official thinking on the wartime food problem; only in its timing did it owe anything to the international situation or the pressure of public opinion. But that pressure had not sought to secure this result at all; it had been directed towards another form of defence preparation, the establishment of Government food reserves.

The idea of a food storage policy was by no means new. On at least two occasions since the beginning of the century it had been propounded as s safeguard against the danger to national security represented by the country's manifest and increasing dependence on imported food supplies. The danger itself had been recognised long before even by those who rated most highly the benefits of such an international division of labour. Richard Cobden, at the time of the American Civil War, during which the cotton-producing Southern States had been blockaded by the Federal Navy, had drawn attention to it. For him, the remedy lay in the amendment of the international law so as to limit the definition of contraband to arms and ammunition. Cobden was thinking mainly of the position of the United Kingdom as a neutral; but twenty years later Henry Sidgwick was already conscious of the possibility that she might become a belligerent. Writing in 1883, he was prepared to admit the need for agricultural protection on defence grounds.^[1]

With the passage of another twenty years, in 1903, the subject had become of such concern as to cause Mr. Balfour's Government to appoint a Royal Commission on the Supply of Food and Raw Materials in Time of War.^[2] Various schemes for storing foodstuffs, especially wheat, were propounded to the Commission, but after an exhaustive examination it rejected them all. They were, it held, unnecessary—the Navy could be relied on to protect merchant shipping, a serious shortage of which was not expected. The commission accepted the Admiralty view that there would be ‘no material diminution in the supplies of wheat and flour reaching the United Kingdom’. Moreover, storage schemes were inexpedient, for they would mean Government interference with private trade. (It must be added that some of them ,at least, were on the same level of practicability as the schemes of the ‘projectors’ who so assiduously courted the Government of Queen Elizabeth.)

The Commission could scarcely be blamed for failing to foresee the development of the submarine, or its unrestricted use. In the worst period for supplies during the war, the spring of 1917, sinkings of grain cargoes for the United Kingdom were running at the rate of ten percent or more, and stock of wheat and flour represented less than six weeks’ consumption. During only four months of the war did they attain the thirteen weeks’ level prescribed by a decision of the War Cabinet in March 1917.^[3] Nevertheless, the admiralty seem to have been more impressed by the effect of the convoy system than that of the submarine campaign to which convoys were the answer. When, in 1923–24, the possibility of a wheat storage scheme was again canvassed at the Committee of Imperial Defence, it was turned down just as firmly as before. The Admiralty—it was reported—were confident that by the end of the first three months of a major war the submarine menace would be under control; normal wheat stocks were likely to amount to least ten weeks’ supplies at any time; a storage scheme would ‘handicap the smooth and cheap distribution of wheat,’ and be ‘extremely difficult to provide and unpalatable to the public’.

In 1924 the notion of a major war was too vague, and its possibilities still too remote, for a break with precedent to be likely. In 1936 it was otherwise; one of the first tasks of the newly appointed committee on food supplies was to re-open the storage question. The desirability of storage was referred to the air and naval staffs; its practicability to an ad hoc inquiry by Sir Ernest Gowers.

From 1935 onwards a considerable body of informed public opinion had grown up in support of a storage policy. The most carefully reasoned case for it, and the earliest in this phase of the discussion, had been put forward Viscount Astor and Mr. Seebohm Rowntree.^[4] They urged it as an alternative to an uneconomic fostering of home production which, they argued, would actually weaken the country in wartime by reducing foreign trade and hence the merchant shipping and ship-building industries. Instead, they suggested storing a year's supply of wheat, at an estimated cost of £40 millions. In April 1936, The Times expressed alarm at the low stocks of wheat in public granaries at the ports—some 200,000 tons—compared with storage capacity estimated at seven times that amount. (This comparison overlooked the large stocks normally in the port millers’ own silos, but went uncorrected.) The Times suggested that the Canadian Wheat Board might be persuaded to hold some of its surplus stocks in the United Kingdom is the British Government would bear the extra coast. In July 1936 Lord Phillimore initiated a full-dress debate on storage in the House of Lords. He urged that the millers be asked to store three months' wheat supplies. Although the Government had already set on foot fresh inquiries into storage, its spokesman, the Lord Chancellor (Lord Hailsham), appeared inclined to pour cold water on it. Wheat, he suggested, might not keep; if we lost command of the seas we should lose the war, storage or no storage.

This seeming firmness concealed, for the Government as a whole, a very real perplexity; for their expert counsellors were unable to provide firm guidance upon the need for storage. Broadly speaking, the naval and air staffs agreed that unrestricted air and sea attacks on shipping must be expected; but they disagreed about the likely effects of such attacks. The Admiralty were confident that convoys and improvements in undersea detection could deal with the submarine menace; they also thought that suitable armed convoys could meet attack from aircraft. The air staff, on the other hand, thought that the naval staff overestimated the anti-aircraft gun and underestimated the bomber, and that convoys, so far from protecting ships against air attack, might provide a ready-made target for the enemy. The staffs were so far agreed as to regard aircraft as more dangerous and incalculable adversaries than submarines or surface raiders; they listed the ‘accumulation of reserve stocks dispersed throughout the country’ as among a number of useful measures of passive defence that might be taken. Beyond that they were not, as yet, prepared to go.

Unless and until the service chiefs could provide a more positive lead, the civilians would perforce be driven back on stating arbitrary assumptions of their own. In July 1936 the Sub-Committee on Food Supplies adopted the following bases for planning, which it thought should provide a ‘sufficient margin of safety’:—

‘(a) that we are liable to a severe temporary interruption and major dislocation of our transport and distribution arrangements for as long as three months after the outbreak of war, and that, as far as practical conditions will permit, it would be advantageous to have in the country on the outbreak of war supplies of essential foods and feeding-stuffs amounting to not less than three months’ normal consumption;

(b) that an over-all decrease of imports of food of twenty-five percent should be assumed for the whole duration of the war;

(c) that throughout the whole period of the war the avenue of supply from the North Sea would be closed to the extent of ten percent, from the Baltic to the extent of ninety percent; and that freedom of supply could be maintained from the Mediterranean’.

The third of these postulates does not call for discussion, since there is no evidence that it played any part in moulding the control plans. The others, especially the second, need closer scrutiny. At the time they were laid down it seems fairly clear that they were intended to assess no more than the resultant, so to speak, of the various forces affecting wartime food imports. The effect of war, they said, would be in the short run to dislocate food imports, or to interrupt them altogether; over the long run to reduce them, as compared with normal, by one-quarter. How far these results would be due to the efforts of the enemy, and how far to the Government's own actions, was not considered. The effects, transient or permanent, on shipping of port congestion, or of such wartime precautions as convoys or evasive routing, were not mentioned, nor was the possibility that the Government might wish to divert ships from food to other cargoes or for the transport of troops.

For the limited purpose of providing some sort of measure of the size of a food reserve, if it should be decided to create one, the assumptions were as useful as any that could have been made. They made it possible to get out detailed plans and estimates of cost. But, just because they were admittedly arbitrary and without expert authority, they did not help much towards deciding whether a storage policy should be adopted, or on what scale. In fact these decisions were to be made, no the basis of expert assessment of strategic possibilities, but on rule-of-thumb considerations of finance and public morale. More important than the influence of the assumptions on storage, however, was their extension to the wider problem of wartime food imports generally. It was here that their want of rigour, particularly when the passage of time had eradicated the memory of their context, led to misleading and even dangerous conclusions being drawn from them.^[5]

Working out the practical details of a storage scheme was bound to take some time, for the ground was entirely unfamiliar. As early as September 1936, however, Sir Ernest Gowers was able to produce a first report on the possibilities of a store of wheat.

The vital feature of any successful scheme, he realised, was provision for turning over and replacing stocks from time to time; and this led them to postulate that ordinary trade machinery should be used, in such a way as to dislocate its normal working as little as possible. Members of the trade concerned should build up and turn over the extra stocks required, ‘buying, holding and selling as Government agents parcels earmarked as the Government’s’; or alternatively, they might be subsidised to maintain their stocks at the required level. The Government would have to take powers requiring participants in the scheme to make returns of their stocks.

The difficulty of applying these principles to grain lay in the multifarious and conflicting interests of those handling it. The highly rationalised milling industry was dominated by three large enterprises, the privately owned firms of Ranks and Spillers, and their natural enemy, the Cooperative Movement, which was outside the millers’ trade association and which on principle did not use the services of the specialist grain importers and brokers who operated on the terminal markets of London and Liverpool. These in their turn were concerned lest they be squeezed out of business by direct purchase by millers in the country of origin—the policy of the Cooperative Movement and to some extent of Ranks also. But they were not accustomed to working together, and some of them were foreign-owned—clearly a disqualification for operating a British Government security stock. Lastly, there was an important and quite separate group of traders in imported flour, mainly in London and Glasgow.

A storage plan that would command the agreement of so many conflicting interests would clearly be difficult to find. Moreover, the existing state of the wheat market was unfavourable to a large-scale Government operation; four successive short crops in the United States and Canada, a crop failure in the Argentine, and two years of large imports into the United States, normally an exporter of wheat, had reduced world wheat stocks to normal proportions, and produced a seller’s market in wheat for the first time since 1927. The experts of the corn and milling trade, disagree thought they might on everything else, were unanimous in declaring that for the Government to enter the wheat market, even under the cloak of some well-established trade organisation, would be liable to send prices sky-high. The only workable scheme Sir Ernest Gowers could suggest was to bypass the market and purchase secretly and directly from the Canadian Wheat Board a large block of ‘May futures’, i.e., options on wheat to be delivered in May 1937; to build silos to hold this purchase on delivery; and in due course to announce to the trade that the wheat had been bought as an emergency reserve, and that no further purchases would be made to long as trade stocks remained normal. The cost of such a purchase of, say, 50 million bushels (1,300,000 tons) was put at £16 million initially, and £1 million annually thereafter.

The risk of upsetting the market might have had to be taken if the case for acquiring a wheat reserve immediately had been overwhelming. But on the evidence before the Government in October 1936 it was anything but that. The Admiralty still held that the very proposal for a wheat reserve cast aspersions on the ability of the Navy to protect shipping: ‘nothing’, it was said, ‘could be done in the air to prevent shipping reaching our south and west coast ports’. (A recent exhaustive enquiry had led to the conclusion that these ports, and the rail network serving them would be able to handle the extra traffic that would result form a diversion thither of three-quarters of the imports normally handled on the east coast.^[6]) Nevertheless, the Admiralty would not take upon itself the responsibility of opposing the establishment of food reserves. The Sub-Committee on Food Supplies recorded approval of the policy in principle, and asked that detailed investigation be extended to other foods than wheat.

By December, when the Sub-Committee met again, Ministers had become more favourably disposed to a wheat reserve, if only on grounds of public morale. They thought it ought to be large enough together with normal trade stocks, to last six months. Despite cries of alarm from the Treasury, and some scepticism from Sir Ernest Gowers himself, they asked him to prepare detailed plans. They also referred to the Cabinet a proposal for buying a month's supply of wheat immediately from the Canadian Wheat Board; but this was, after further discussion, turned down on the ground that the market was unfavourable. Even so, the Cabinet asked that the question of a Bill empowering the Government to buy reserves of essential commodities should be explored and Draft Bill prepared. By February 1937 four detailed schemes for the storage of a balanced group of foodstuffs were ready, ranging from Plan I, an emergency scheme for feeding London for month, to Plan IV which would provide together with normal trade stocks, for months’ supply of wheat, four months’ supply of oilseeds, three months’ supply of sugar, a large supply of whale oil (for cooking fat and margarine) and quantities of canned meat, canned milk and cheese, together with no less than six months’ supply of feeding grains for animals.

By this time the chief question at issue had become how much ought to be spent on a storage scheme. The Treasury set its face against borrowing for such a purpose, and wanted expenditure limited to £25 millions, spread out over a number of years. This meant, in practical terms, the adoption of the ‘minimum’ Plan II, which included only so much wheat (188,000 tons) as could be housed in existing storage accommodation. (It was the need for building special stores that made the larger Plans III and IV so much more expensive.) The Cabinet put off a decision in principle until the ways and means had been more fully explored; meantime, in order to make the announcement of a food storage policy more palatable, the Minister of Agriculture, at his own suggestion, was authorised to prepare proposals ‘for increasing the productivity of our own soil with a view to ensuring increased food production in time of war’.

In July the subject came up yet again, the report of the officials^[7] who had been asked to work out the terms and provisions of a Storage Bill; and yet again the Cabinet put it off; this time because a ‘conspectus’ of defence expenditure was being undertaken. The most Ministers would agree to was that a food storage scheme, based on Plan II and an expenditure of £20 millions, should be brought up as part of the conspectus. Even so, approval of the scheme in principle would not mean that the sum to be spent on it would not be whittled down. There matters were to rest for another nine months.

{{{1}}}

Three times—in December 1936, in February 1937, and again in July 1937—the Minister for Coordination of Defence had tried and failed to get the Cabinet to take decisive action on food reserves. Meantime it fell to him, as the responsible Minister, to defend his colleagues' inaction against steady and weighty public criticism, headed by Sir Arthur Salter, M.P., who, by private interviews and memoranda, Commons speeches, and press articles^[8] strove to impress on Ministers that food storage was not, as some thought, ‘a kind of luxury addition to our main war preparations’. Sir Arthur saw it clearly as a means of reducing the demands on shipping once war had broken out; it would release tonnage for munitions and raw materials, relieve us of the need, otherwise imperative, of importing more than our current wartime consumption of food in order to build up stocks. The effect would be felt not only in lessened strain on the Navy and merchant marine, but in the wider field of general strategy. Ample food stocks

‘would exempt those who have to take the highest decisions of policy from the panic atmosphere that must result if only a few weeks’ supply separate the country from starvation. Repeatedly during the last war the gravest recommendations were made as to the need of closing down some of the military expeditions and even the main conduct of the war in consequence of the shipping shortage and the danger of starvation; and the character of this danger several times led to the actual gravity of the transport and supply situation being greatly exaggerated'.

For this purpose, however, small additions to existing port stocks, on the lines Sir Arthur rightly suspect the Government to be contemplating, were inadequate. What was wanted was dispersed inland storage of foodstuffs equivalent, say, to a year's supply of wheat; but there was no need to have the stocks as wheat, or ingeniously balanced between one commodity and another. Sugar, which was cheap and stored better than wheat, would be especially suitable for security stocks, and since ships were completely interchangeable between wheat and sugar, having the one was equivalent to have the other. Besides the technical arguments for a security stock, there was one strong political argument, namely that they could not provoke a competitive armaments race.

The Minister for Coordination of Defence and his advisers, so far from accepting the need for ambitious schemes of this kind, had in fact agreed to scale down the proposed capital expenditure from £20 millions to £10–12 millions before putting it up to the Cabinet again. For this purpose the original Plan II (described at the time as a ‘minimum’) was reduced to a simple plan to buy 400,000 tons of wheat, 150,000 tons of sugar, and 100,000 tons of whale oil.^[9] The chief economy was at the expense of oilseeds; reduced from 375,000 tons to 75,000, they were to disappear altogether when the Treasury reversed its views of the previous year, decided to cover the expenditure by borrowing, and decreed that it should be reduced by the amount of the annual interest charge. There could be no pretence that the revised plan constituted an adequate insurance; officials supporting storage in principle regarded it rather as a lever to secure Ministerial agreement to the establishment of any Government reserve at all. If that could be done without upsetting the market and the trade concerned, it would be relatively easy to increase the stocks later on.

The new proposals, while differing not at all in principle from those of Sir Ernest Gowers, were almost ostentatiously based on consultations with the trade; the elaborate arrangements for an ad hoc Statutory Commission that had been discussed the previous July were allowed to fall into the background. The first breach in the opposition front—opposition, that is, to storage in practice rather than in theory—was made on 2nd February 1938, when the Cabinet agreed to a stopgap arrangement Sir Thomas Inskip proposed to make with Lever Bros. and Unilever,^[10] by which they would undertake to maintain their stocks of whale oil in England for the next year at not less than 60,000 tons by regular shipments from Holland, if the Government would pay the extra cost.

The crucial commodity, for which a convincing and successful scheme must be produced, was of course wheat; and the Food (Defence Plans) Department therefore advised Sir Thomas Inskip to call upon the leading millers for assistance. In March, directors of Spillers, Ranks, and the English and Scottish Cooperative Societies’ milling departments agreed to cooperate in purchasing and maintaining a stock of 400,000 tons of wheat, to be held on Government account in addition to their normal stocks, and turned over and replaced in the course of trade. A Committee, representing the participating millers, with an independent ‘small’ miller as Chairman, would be responsible for managing the stock, which was to be acquired in a single secret purchasing operation, if possible within twenty-four hours of the word ‘go’. This plan, together with similarly ‘trade-sponsored’ arrangements for sugar and whale oil, passed the Cabinet on 6th April.

In anticipation of the Cabinet decision the Department had summoned the millers’ committee to meet next day; and there it was agreed that, in order to preserve absolute secrecy, the decision to begin actual buying should rest with Sir Henry French alone, and that the operation should be undertaken jointly by Mr. J. V. Rank on the Baltic and a Cooperative Wholesale Society buyer working under his instructions in Winnipeg. No-one at the meeting, except Sir Henry himself, knew that Cabinet approval had already been given. That very night he telephoned from his home to Mr. Rank to ask how the markets had closed, and was told that conditions were not unfavourable for a large purchase. Next morning the Government agents were told to go ahead, and within twenty-four hours had secured seven-eights of the desired amount, only ceasing operating when the market showed signs of rising more than the shilling above opening prices fixed by Mr. Rank as his limit. The remainder of the 400,000 tons—half ‘spot’ Australian, half Winnipeg ‘futures’ for October delivery—was secured by 11th April.

The surprise tactics had been a complete success; but so large a purchase on a single day, even by a firm of the size of Mr. Rank's, was bound to arouse suspicion that the Government was behind it. If the market were not remain disturbed and uneasy, the trade must be reassured; and for this purpose the bald statement in the Chancellor of the Exchequer's budget speech^[11] that the Government had acquired reserves of wheat, whale oil and sugar was hardly sufficient. Early in May, therefore, meetings of grain trade and milling representatives were held at which the way in which the scheme would work was confidentially explained. The milling concerns, who would do the work without remuneration, had been chosen because they alone could turn over the wheat without a second market transaction. It would be stored in existing granaries; but every effort would be made to avoid incommoding the trade's normal operations. While the amount of the reserve could not be disclosed, no further additions to it were contemplated. These statements served to calm grain traders, if not to allay their disappointment at not having been employed, or even consulted, in advance.

In purchasing a store of whale oil the Department, for temporary tactical reasons, went back on its general principle of working with the trade. At the time the Cabinet decision was taken it had still not completed a formal agreement with Unilevers for the maintenance of a minimum stock at Bromborough. Meanwhile, the Government Government had bough some 100,000 tons of the current catch, leaving some 160,000 unsold; clearly a bulk purchase of 100,000 tons by the British Government might raise the market against any other buyers, of whom the chief was likely to be Unilevers themselves. The Department, rather than take them into its confidence, preferred to work secretly through a leading broker;^[12] but his initial purchase of 40,000 tons immediately became known to the trade through the whale oil sellers’ pool, of whose existence the Department appears to have been unaware; the price was immediately put up from £12 15s. to £14 a ton. There followed protest from Unilevers that the Government had treated them shabbily. After all, it was they who had suggested the creation of a reserve in the first place; they were even then arranging to assist the Government in a stopgap scheme without profit to themselves; surely the least it could do in return was not to force the market up against them. As a result, the stopgap scheme was abandoned, and Unilevers were offered and accepted a share in the Government’s remaining purchase, made at an average price of £13 4s. The feeling engendered by this episode on both sides had so far died down by July 1938 that Unilevers were prepared to join with the other principal consumers of whale oil, Thomas Hedley & Co. Ltd., and the Southern Oil Co. Ltd., in arranging for the safe keeping of the Government reserve on their premises. These arrangements were well in train by the time of the Munich crisis, which, however, saw nearly half of the Government reserve still stored on the Continent.

The purchases of wheat and whale oil were complete though not delivered by the time they were announced; but only an interim stopgap purchase of sugar had been made. The two main trade interests, namely the State-sponsored British Sugar Corporation controlling the manufacture of home-grown beet sugar, and the refiners, Tate & Lyle Ltd., were agreed that the best way for the Government to obtain a dispersed sugar reserve would be for the greater part of it to consist of home-grown raw sugar that would otherwise be sold by the Corporation to the refiners;^[13] the amount thus withdrawn from consumption would, of course, be made up by further imports. This arrangement could not be put into force before the autumn, when the sugar ‘campaign’ began, and then only gradually. It was in the summer, however, that sugar stocks were at their seasonal lowest; to tide over the next few months it was agreed that the Corporation, on behalf of the Government, should purchase from and subsequently resell to Tate & Lyle 50,000 tons of Empire sugar then in stock in Liverpool. This would, in effect, immobilise sugar that would otherwise have gone for refining and oblige the refiners to import an equivalent amount for immediate use. In addition, Tate & Lyle were asked, and agreed, to maintain their minimum seasonal stock at 50,000 tons more than the normal. The effect of these measures would be that bulk stocks of sugar would be increased by 100,000 tons that summer and a further 150,000 tons had been bought.

Meantime it remained to legalise what had been done. The Essential Commodities (Reserves) Bill was introduced into the Commons on 26th May, passed its second reading without a division on 2nd June, and finally received the Royal Assent on 2nd August. It empowered the Board of Trade (in effect the Food (Defence Plans) Department) to acquire, by direct or indirect means (e.g., through subsidies to trades), stocks of essential commodities, and provided funds for the purpose. It further gave powers to the Department to require the disclosure of trade stocks. The policy of food storage had at long last been translated into accomplished fact.

{{{1}}}

The smoothness with which the storage operations (apart from the whale oil incident) had begun was not to be maintained for very long. The first difficulties arose from the decision to use existing stores, largely in Liverpool, for the storage of ‘security’ wheat and of the 50,000 tons of sugar to be bought by Tate & Lyle in replacement of that immobilised in their own warehouses. Within a few days of the decision to buy there were complaints from the Mersey Docks and Harbour Board that to put these foodstuffs into dockside warehouses would be completely contrary to the policy of keeping ports clear, laid down by the Port and Transit Committee of the Ministry of Transport^[14]—complaints to which the food (Defence Plans) Department could only reply that that aspect of the matter had not occurred to it. The Liverpool authorities refused to allocate more than half the available dockside space to Government wheat; but even so there was at one time in the autumn of 1938 no less than 160,000 tons of it there; and the grain trade complained that this would leave insufficient elbow room for the forward purchases of Australian and Plate what that would be arriving in March and April 1939. The trade asked that 90,000 tons should be moved to up-town warehouses; the Department counter-proposed that trade wheat should be put into these, which were not certainly suitable for long term storage, the Government to make a contribution to the extra cost.

Arguments continued throughout the winter, and late in February the millers advising the Department at last agreed to reduce the stock on Merseyside to 100,000 tons. Before anything was done about this, a telephone call came through from Liverpool one day in mid-March, to say that two-and-a-half cargoes were due and there was no room for them in the stores. Space was cleared for one cargo, but the second ship had to be kept on demurrage because she could not unload; the Department undertook, with Treasury consent, to pay part of the demurrage charges. The Liverpool grain storage authorities now came forward with an offer to contribute towards the cost of moving 20,000 tons of wheat up-town, and this was at last agreed to. Even so, the crisis seems only to have been satisfactorily surmounted because less wheat came forward than was expected—or in other words, because trade stocks were reduced below expectation.

A more general trade grievance, not confined to Liverpool, arose only incidentally from the Department's activities. The early meetings of the wheat storage advisory committee had been notable for sharp conflicts between the Cooperative and ‘capitalist’ millers; but better acquaintance, and the tact of officials, had so far removed this antagonism that in the autumn of 1938 the rivals joined in a big purchase of wheat direct from the United States Government, so that the grain trade was deprived of the commission. More provoking still was the Government's decision, on political grounds, to buy 200,000 tons of wheat from Romania. This proposal was first mooted in July 1938, and was backed strongly by the Foreign Office and the Government's Chief Economic Adviser. The millers did not want Roumanian wheat; they had already covered their requirements of soft wheat months ahead at lower prices than the Roumanians were asking. The wheat was not suitable for the security stock, since it had indifferent keeping qualities, and anyway (the Department pointed out) there was insufficient money to buy more wheat and nowhere to put it except on the east coast, which was considered vulnerable.

Nevertheless, Ministers decided that the purchase must be made if a reasonable price could be fixed; and in fact the Roumanians, who had been asking 74s. a metric ton f.o.b.; Braila, were forced down, thanks to the Department's opposition, to 62s. 6d., or no more than the market price—a saving to the Exchequer of £100,000. The millers urged that the new purchase should be milled on arrival, but the Essential Commodities Act did not empower the Government to buy except for storage; the Roumanian wheat was, therefore, used to replace existing security wheat, and within a few months was in its turn take out for milling. The millers—notwithstanding their dislike of the whole proposal—cooperated in making this arrangement work smoothly; but it aroused the greatest indignation in the grain trade. In November a deputation from the trade alleged that if these direct purchases (in which it included, of course, the millers’ own American deal) were to continue, the trade would be unable to carry on; and their protests were so far heeded that an assurance was given that there would be no more such purchases during the current cereal year. Moreover, the trade was invited to confer with the Department and the millers on ways and means of associating it more closely with the storage scheme. But the very first meeting in March 1939 served only to disclose the acrimonious gulf that lay between millers and grain traders.

Meantime, the sponsors of the Roumanian purchase were hatching plans for an Economic Mission to Roumania and a further purchase of wheat. The Food (Defence Plans) Department did its best to discourage them; it pointed out that the Cooperative Wholesale Society, and probably the other millers, would refuse to work the storage scheme if the Government gave way to the grain trader's demand that future purchases on Government account should be made on the open market through the trade; on the other hand, the trade could not be expected to bring forward wheat for the country's normal needs if it were completely uncertain whether the Government would not at any time enter into competition with it. In the end the Economic Mission was sent, and did agree in principle to a further purchase of 200,000 tons from the 1939 harvest, if available at world prices. When the time came, however, German bidding forced up the price so high that the British representatives were shut out; only on the 27th August did the Roumanian Legation in London come forward with an offer of 200,000 tons of wheat and a proposal to store a further 150,000 tons in this country on behalf of the Roumanian Government—the one impracticable for want of storage accommodation, the other too late. War came, in fact, before any solution of the problem of political purchases and the grain trade's relation to the storage scheme could be found. Departments had be then agreed on a compromise that would have given the trade assurances that only 250,000 tons of wheat was likely to be purchased in the cereal year 1939–40, and that it should be possible to give two months’ notice of any arrivals of wheat directly purchased. Even this concession had only been wrung from the Foreign Office by ‘straight and forcible talking’ from the Food (Defence Plans) Department, and it seems very unlikely that it would have satisfied the trade.

The diplomatic merits of the Roumanian purchase cannot be discussed here. But it not only risked the goodwill of the millers by dictating the composition of their grist; it roused all the antagonism latent among the private interests handling grain. Apart, however, from this last straw, the resentment of grain traders at being shut out of the scheme was natural. It was difficult for them to believe that the participating millers were not making something out of it, if only from their knowledge of the size and composition of the Government stock. To them it seemed that the Government was aiding and abetting a millers’ buying ring, at a time when the enormous world wheat surplus was causing markets to tumble. It was, therefore, only politic for the Department to attempt to allay these suspicions, if only by adding a grain trader to the advisory committee. The millers opposed this on the ground that it would lead to prices being forced up against the Government; and since the millers’ cooperation was essential if the Government were not to be constantly buying and selling wheat, they were in a strong position to make their views felt; all the more so since they were doing the work without profit to themselves.

A scheme, however convenient and inexpensive, under which the Sate was beholden to one particular section of a trade while the remainder was out in the cold could scarcely endure, assuming as it did in effect that the organised grain market was nothing more than a speculators’ racket. If the grain trade were not good enough to be the suppliers of the Government's food stores, the sooner they were deprived of the much more important task of handling the nation’s wheat supply, the better. The Department was not so naive as to swallow arguments of this kind when they put forward explicitly. But its whole practice had been based on the unspoken assumption that tactics had more influence on prices than had underlying economic trends; it did believe that the original highly dramatic and secret purchase of wheat was the only way of doing the job without raising prices. On the contrary; as a leading grain trader pointed out the Department in 1939, the futures market offered the ideal means of acquiring a reserve quietly and with the minimum of disturbance. All that a buyer need to was to accumulate futures to the desired amount over a period of months, and take them all up in a body when they matured. Indeed, it is at least arguable that to proceed by a sudden coup de main was to invite the maximum of speculative dislocation. On that view, the success of the operations of 1837 must be attributed mainly to the world glut of wheat.

That this must have been largely true is confirmed by what happened over sugar, where an equally ample world supply was controlled by an international restriction scheme that strove to adjust export quotas very closely to consumption. Since the total regulated world supply of sugar was of the order of 3 million tons, the amount to go into the Government store—150,000 tons—was such as to call for a very watchful eye on the market, so that application could be made for an increase in quotas directly the price looked like getting out of hand. It so happened that 1938 was the worst season for the British sugar crop for years; the sugar content of the beets was so low that the Sugar Corporation could only spare 60,000 tons for store instead of the 100,000 promised. In mid-December, therefore, recourse was had to Empire sugars to make up the balance; but by that time the market had so hardened that these could only be obtained at a reasonable price through the good offices of Tate & Lyle, who agreed to exchange Empire sugar in transit to themselves for foreign sugar purchased by the Corporation.^[15]

Nevertheless, the Food (Defence Plans) Department appears to have disinterested itself in the question of export quotas, and the British delegation to the January 1939 meeting of the International Sugar Council not only made no attempt to get them increased—an attempt that might well have been blocked by the producer countries—but took no steps to make sure that any deficiency was in fact remediable at short notice under the terms of the Agreement. In this attitude officials appear to have had the support of the refiners, notwithstanding that in November these had hinted at a shortage. Late in April, Tate & Lyle raised the alarm afresh, declaring that their stocks would fall to vanishing point in July unless they could get further supplies; and as a result, the Board of Trade did secure from the Council in April, May and June, releases of sugar that stayed the upward rise of prices. Much of this sugar was, however, either refined sugar and, therefore, of no use to the refiners, or was from sources too far away for it to arrive in this country till after the seasonal low of stocks had passed.

Moreover, since the increased demand for security hoards was by its nature temporary (and likely to be at its highest in the summer, the war season) forward sugar for September–October delivery was standing at 1s. 6d. to 2s. percent below spot prices for July and August. This was an invitation to all sugar users to cut their stocks to a working minimum during those months^[16]—how strong an invitation may be judged from the fact that Tate & Lyle stood to lose £100,000 if they carried out their undertaking to maintain an extra 50,000 ton in stocks; indeed, they would have preferred to let their stocks fall below normal by that amount, this saving £200,000. They put their case to the Department and it was agreed that they could not be asked to carry out their full undertaking; at the specific request of the Minister^[17] they did undertake to keep their stocks at the normal seasonal low of 100,000 tons.

That the leaders of the trade should so miscalculate the position does not more than palliate the failure of those officially responsible for looking after United Kingdom interests. It needed no very great penetration to see, at any time after September 1938, that the combined effects of security hoarding and crop failure might do more than wipe out any excess of quotas over consumption; and that if this occurred, there would be a temporary hump in the price curve and a consequent reduction of trade stocks. The conviction of most officials (and traders) that no general shortage of sugar was likely was beside the point, which was one of position and timing. The Food (Defence Plans) Department, though certainly at fault in not raising the question on its own responsibility, had at least the excuse that it was not consulted until the refiners had raised the alarm.

{{{1}}}

The Department was at its resourceful best in the second whale oil catch was disappointing that year; and when news reached London that the German buyers, who by arrangement with Unilevers had a prior claim on supplies of Norwegian oil, had failed to agree with the Norwegians on price, the Department saw an opportunity to corner the world supply, and thus not only add valuable asset to our own food reserves, but deprive Germany of it at the same time. Unilevers and the other users of whale oil agreed to share in the purchases which were made anonymously through a leading broker,^[18] and after some anxious moments—chiefly because the Department’s Treasury Authority to purchase ran out before negotiations could be brought to a head^[19]—they were completely successful. Besides 80,000 tons from the Norwegians, the Department had already acquired a further 60,000 from British and South African sources; and the trade some 90,000 tons, including nearly 50,000 tons from Japanese catchers. Only leavings of not much more than 10,000 tons remained to the Germans, who had clearly counted too much on their knowledge that all the existing commercial storage space in this country was full; and supposed the Norwegian whalers would have had no alternative but to sell to them. Storage for the new purchases was indeed a serious problem; pending the construction of further tanks, some of it had to be left on the Continent, and the rest put either into laid-up oil tankers or into fuel oil storage at Thameshaven. The latter was admittedly vulnerable to air attack, and the Admiralty in September 1938 had actually recommended that whale oil reserves should rather be kept in Holland or Belgium, despite the chance that these countries might, under enemy pressure, put an embargo on its export discovered by experiment that whale oil was not as dangerous as petrol or fuel oil; moreover, the air defences of the region had been much improved in the interim.

The Treasury, whose insistence on financial economy had half-strangled the original storage schemes, cooperated readily in this and other proposals for increasing food reserves that the Department put up during 1939; indeed, it went further and actually invited them. This change of front was due to its increasing concern about wartime foreign exchange difficulties; its interest in judicious advance purchases of essential raw materials appears to have been aroused by Mr. J. M. Keynes’ scheme, propounded at a British Association meeting in August 1938, for free or cheap storage facilities to be offered in this country to Empire primary producers. In January 1939 an Interdepartmental Committee on Exchange Requirements and Essential Materials in Time of War was set up, and at the end of that month the Food (Defence Plans) Department secured sanction for the purchase of 20,000 tons of South American canned meat, to be used as a reserve iron ration for the evacuation scheme. (In practice it proved impossible to buy so much, and the deficiency of about 2,000 tons was made up with British-canned herrings.) In March, proposals were approved for building silos to hold 250,000 tons of wheat, for a further purchase of 200,000 tons to be put in them when built, and for a subsidy scheme to encourage bakers to hold an extra week’s supply of flour in their premises. Early in April the Department secured assent in principle for a reserve of 400,000 tons of oil seeds—included in the original proposals but dropped for reasons of finance; and for no less than 1,500,000 tons of fodder grains, to tide over the animal population until the first war harvest should become available.

Such schemes as these were obviously for the long term; but by this time it was more and more evident that the sands were running out. Sir Arthur Salter and his friends, who had never ceased to criticise the inadequacy of the existing programme, now redoubled their efforts; ‘I do entreat you’ (wrote Sir Arthur to Mr. W. S. Morrison in April) ‘to give your personal attention to the question of bringing in large supplies at once. A great deal could be done by urgent action in even a few weeks’. In July the outside agitation was reinforced from within Whitehall by the unanimous report of the Interdepartmental Committee that ‘no effort should be spread to reduce foreign exchange requirements in wartime by pre-war purchases’; on the 26th the Cabinet approved the immediate purchase of £5 millions worth of food and £15 millions worth of raw materials. So much food was not, however, immediately available; and the purchase actually approved by the Treasury amounted to considerably less than this. They included 100,000 tons each of wheat and of ‘forward’ sugar for September delivery; frozen meat to the value of £900,000 and a further 10,000 tons of canned meat. War broke out before any of them, except the wheat, could be delivered. The bulk reserves of foodstuffs held by the Government on 3rd September 1939, amounted to just under 500,000 tons of wheat, 150,000 tons of raw sugar, and 240,000 tons of whale oil.

Except for whale oil, the influence of these stocks on wartime food supplies was not very great. Their importance lay rather in that they had been acquired without bringing about the disasters that many, including some Ministers who favoured the policy in principle, expected from an entry by Government into the commodity markets. The Department believed that the original purchases of 1938 were decisive in raising its prestige with the food trades and making smooth the path of control preparations in general. Certainly it was to show a gift for timing and tactics that need not shame the ablest market operator; in the main it chose its trade advisers wisely and used them well. Its troubles with wheat and sugar stocks in 1939 indicate, however, a weakness—an inability to take a broad and long view of economic strategy—that was to recur more than once in the later history of food control. The management of pre-war reserve stocks already showed the strength and limitations of that collaboration between trader and civil servant on which the Ministry of Food was based. Officials were to have little difficult in picking up the tricks of the trade, or traders in learning the conventions and customs of the Civil Service. Neither accomplishment, though indispensable, was sufficient for a world in which, even before the war had broken out, the trend towards national and international interference in economic matters had more and more displaced or distorted the measuring rod of market price. It was not enough to rely on a combination of official secrecy, trading acumen, and untrained common sense to bring success to a Government economic enterprise. The majority of traders and civil servants, though they might consider themselves very different sorts of person, were alike in having a long-standing, often cultivated, tendency to improvise policy, even where they would not dream of improvising machinery; a quality that thought it would get them out of many a tight corner, seldom prevented them from getting into one. It is this improvised quality that gives the commodity dealings of 1938 and 1938, for all their operational skill, an anachronistic air not proper to the age of ‘sophisters, economists, and calculators’ that had already come upon us.

Endnotes

1. This paragraph is based on a valuable, and, it seems, little known discussion by Sir William Ashley, appended (p. 205) to the Final Report of the Agricultural Tribunal of Investigation. 1924 (Cmd. 2145).
2. Cd. 2643/44/45 contain its Report.
3. Ashley, op. cit., p. 209 seq.
4. Astor, Viscount, and Rowntree, B. Seebohm. The Agricultural Dilemma. 1935.
5. See below, Chapter V.
6. The validity of these conclusions will be examined in Chapter IX below.
7. The primary responsibility for storage questions had now passed to the Food (Defence Plans) Department.
8. Most notably in the Economist, 10th October 1937. The proposals in this article had been sent to Sir Thomas Inskip in July.
9. Financial provision was also proposed for emergency ‘iron rations’ for air raid refugees; but nothing was done about this till after Munich.
10. This plan was first mooted at an interview between the Minister and the Chairman of Lever Brothers and Unilever, on 10th December 1937, of which the most significant feature was an obiter dictum of which Sir Thomas Inskip left note. ‘[He] told me that there is not more than three week’ stocks of fats in Germany at any given time, and from conversations which he has had in Germany, he regards any possibility of war in these circumstances as wholly remote.’
11. It was at Sir Thomas Inskip's own request that the announcement was so made, instead of separately by himself.
12. The broker employed stipulated for commission from the Government as a buyer, contrary to the customer of the trade. This leaked out when a rival firm of brokers claimed that he had deprived them of commission that they would have other wise have enjoyed as the seller’s agent.
13. i.e., sugar surplus to the Corporation's own refining quota, under the industrial agreement with the refiners.
14. See Chapters IX and X below.
15. empire sugar was preferred for storage purposes as being sufficiently pure to be usable without refining in case of emergency.
16. The British Sugar Corporation, in July 1939, asked unsuccessfully if it might borrow 30,000 tons of Government sugar till October, when sugar would be cheaper.
17. Mr. W. S. Morrison, Chancellor of the Duchy of Lancaster, had been made responsible for food defence in March 1939.
18. Not the broker who had the 1938 purchases.
19. It ran out a the weekend—just when the Norwegians showed signs of coming to terms—and had to be renewed after hasty consultations with the Treasury and the Foreign Secretary himself on the following Monday morning. As with the 1938 wheat deal, all the preliminary negotiations were carried out, on the Government side, by Sir Henry French, single-handed and in secret.