811.61311 Germany/4: Telegram
The Ambassador in Germany (Sackett) to the Acting Secretary of State
[Received July 21—3:36 p.m.]
139. Department’s 126, 20th of July, 3 p.m. Chancellor Bruening is in London. Consequently, I have talked with the Minister of Agriculture, Schiele, about the sale of wheat and cotton. I made no mention of prices. I had difficulty in making him understand that the intention was to formulate a plan whereby Germany would be granted considerable financial aid. He finally seemed to grasp the purpose and at present he is privately conferring with the Minister of Finance20 who is the Acting Chancellor, and with the President of the Reichsbank.21 In view of the fact that Canada, Russia, and Argentina are making almost irresistible demands for the sale of wheat, Schiele stated that the proposal must be kept secret; and, if acted upon must be made public as a fait accompli. He realizes that, if the suggestion is considered practical, it must come from Germany. As Minister of Agriculture, Schiele does not see the financial difficulties as keenly as he does the agricultural. Schiele’s main problem is to dispose of a certain quantity of German soft wheat, the principal market for which is England, and to achieve this, it is virtually necessary to take hard wheat in return as a trade. His initial opinion was that his own particular difficulty would not be facilitated by my suggestion. Today or tomorrow morning I expect to have the first reactions of the Finance Minister and Dr. Luther, or to have a conference with them.
Department’s 123, 16th of July, 1 p.m., with reference to wheat. In a recent conversation which I had with Bruening he confidentially told me that his Government would want to buy about 50,000,000 bushels of hard wheat. It would like to obtain wheat from the United States, as that from Eastern Europe was of the soft variety. Since he preferred to deal with America, he pointed out in the same conversation that it would be immaterial if he had to pay slightly more for the wheat from the United States. Although I made no effort to have him expand this idea, I did make note of the conversation for future reference. The need of Germany for two to three hundred thousand tons of hard wheat was confirmed today by the Minister of Agriculture.
[Page 297]With regard to the fourth paragraph of your 123, my personal observation as well as official and general opinion do not bear out the statement as to depressing or inferiority effect. Last summer the Government issued regulations which required substitutes to be mixed with wheat in milling. The regulations were practically ineffective and lasted only a short time. Since that time the restrictions in force require that 80 percent domestic wheat be used by the millers in milling flour. These regulations were intended to be a measure of relief to agriculture. In connection with a prohibitive tariff on the imports of wheat, a consumption of a large part of the domestic crop is secured at good prices. Although the quality of the bread produced under such restrictions is not as satisfactory as formerly because the mixture contains a low proportion of hard wheat, it apparently provides the necessary nutrition for the population. In Germany’s present financial difficulties, the poor classes of the population are using as voluntary substitutes for wheat bread, the heavy surplus of rye, thereby forcing a low price, and the large and cheap potato crop. The proposal of the Department that Germany buy wheat on credit will yield considerable income to the German Government because the duty is about $1.60 per bushel. Domestic wheat in Germany is also about the same price.
In the eighth paragraph of your telegram the price plan regarding cotton is giving me great difficulty. There is severe competition between the spinning industry in Germany and that in neighboring countries. To compete, the Germans must secure their raw material at the lowest possible price. Should the German Government sell to the spinning industry at a price above the prevailing market of the month of delivery, my opinion is that the industry would be operating at so great a disadvantage in its foreign competition that, despite the favorable rate of interest over the $.14 price, it might be more a hindrance than a help to Germany’s finances. Because there is no duty on raw cotton, the German Government would be unable to reap a profit by reselling to its industries. I can only suggest whether the American cooperatives like commercial interests could sell their cotton at the market and hedge winter sales in future contracts, and resell the hedge as the market rises.
Your suggestion regarding wheat and cotton in paragraph 8 would encounter difficulties here. My fear is that a telegram does not explain them clearly and fully.