DEMANDA Y TIPOS DE PÚBLICOS DE MUSEOS

The spinners found themselves in a unique position. While at the one end they had to navigate through the daily price fluctuations in the raw jute (raw material), on the other end they also had to gauge carefully the price fluctuations of yarns. A careful dealing in this end was regarded as being enough to earn large profits for spinning firms. This was also the case with Buist Spinning.

The activity of managing the procurement of jute and selling yarns was referred to the management as ‘hedging’. Although the term ‘hedging’ appears to give primacy to the role of ‘speculation’, in practice it was much more then that. It constituted judicious buying of raw jute and selling of yarn to reduce uncertainty of fluctuating prices in both these markets. It involved using highly personal judgements on the future movements of markets. Any misjudgement in this area would lead to jute being purchased at very high prices and/or yarns being sold at a low price, thus seriously affecting the firm’s cost structure, revenues and eventually its profitability. The policy involved buying jute and selling yarns in advance as and when the prices were deemed appropriate. This meant that often jute was bought in advance for a couple of months without yarns being sold. It also meant that sometimes yarns were sold without first securing the supply of cheaper jute.

Such advance buying of jute or selling of yarn helped in three areas: Firstly, buying jute at reasonable rate enabled Buist to keep control on the cost of raw material. Secondly, flexibility in advance of selling yarns enabled it to secure the best possible price in a highly fluctuating market. And thirdly, it played a major role in securing the better qualities of jute which were essential for manufacturing the fine qualities of yarn. The better qualities of jute were available normally early in the harvesting season. Therefore it was important to secure them during a particular period even though there may not be enough yarn orders to justify the purchase. Therefore, although it was not useful directly in meeting international competition, ‘hedging’ played a supplementary role in sustaining the technological capability in manufacturing

medium and fine (discussed in the next section) yarns by securing a suitable quality of jute at a suitable price.

This policy was followed right from the inception of the firm. The board’s extensive experience in shipping and merchanting played a vital role in determining the course of the policy. In a report of their first meeting, the board noted the following with regard to procuring raw jute:

“The company had jute secured at a moderate rate up to the end of July and Yarns have been sold at fair rates for delivery so that the production is hedged for some time. The Board is watching the jute market carefully at present of the view of adding gradually to stock as the season advances.”125

Similarly, in the case of yarns:

“The Directors mentioned that prices of yarns have continued to rule on a high level and no opportunity has been missed of hedging well forward by sales which show a good margin against the raw material, which has been secured into November at a very moderate rate as prices now rule.”126

Its importance cannot be undermined, considering the high level of fluctuations in the price of raw jute and yarns. In order to keep a track of the markets, management kept a close watch on price movements. Table 19 gives an indication of the level of price fluctuations that they had to face during a year.

Table 19 Average Raw Jute Prices (1912-1913)127

Jute Highest Lowest Average

First Mark 27 20.5 23.8 (33 1/3 %)

First half of year: 20.5 to 24; 22% Second half of year: 21.10 to 27; 26%.

125

DUA MS/71/1: 14thMarch 1901

126_{DUA MS/71/1: 27}th_{June 1901} 127_{DUA MS/71/1: 14}th_{February 1913}

Being an agricultural commodity, the production of jute, and also the price, was highly dependent on the state of climatic conditions during the year. The onset and development of the monsoon season played a major role in sowing and harvesting of the crop and thus the final annual production of jute. On their part, management diligently followed reports of sowing, forecast on rain and the official Government forecasts for the year’s output. However, forecasts by Government did not always reflect the conditions on the ground. Therefore a close watch was kept on the developments through Buist’s own network to assess the latest situations.128

A judicious management of procuring raw jute and selling yarn gave the firm an advantage over the local competitors, especially when the price of jute and yarn was going in the opposite direction i.e. higher jute price and lower yarn price. Having a stock of raw jute that was cheaper then the prevailing market rate, allowed them to sell yarns even when yarn prices were very low. On the other hand, competitors who did not hold a stock of cheap raw jute found it difficult to sell when the yarn prices were sagging. Such occurrences were very frequent and in one such instance, in taking stock of the situation the board noted:

“Better rates are however required to meet the higher prices now ruling for the raw material and for those who have to buy jute against present yarn prices it is bad business. In view of our cheap stock of raw material, our prospects are fair for the current year.”129

The high level of volatility in jute and yarn prices continued during the inter-war years. The immediate period following the end of the First World War was highly volatile. The price of yarns, especially the 8 lbs quality, fell and again rose by approximately 32% and continued to rise. The fine quality jute on the other hand fell by 21% and then rose 45%.130 The second period of high level uncertainty was between 1929 and 1933. With the trade affected by the ongoing global depression, it was termed by the directors as one of the most trying times. The depression meant that prices of goods were at their lowest. As a result, the yarn prices did not take an upward turn for a considerable period of time to enable them to take advantage of

128

DUA MS/71/1: 27thJune 1901

129_{DUA MS/71/1: 16}th_{March 1903} 130_{DUA MS/71/2: 3}rd_{February 1920}

cheap jute. The reducing of margins did not make an attractive climate to sell yarns in advance. Yet, the original policy of purchasing jute when the price was low was continued and directors relied on the past experiences to guide them through this phase:

“The policy of your directors from the inception of the company has been to keep well supplied with raw material and in the past this has proved to be the right course. Since the price of jute had drifted to an abnormally low level it would in the opinion of the Board, have been against the interest of the company not to have ample supplies. There is also the necessity of our having to buy early for our fine counts. However, at the time of striking our annual balance had drifted to a still lower level and in accordance with our custom our stock was written down to the new low level. Having secured a good and well selected stock we are now in a position to take full advantage of to improvement which we hope may come.”131

An alternative would have been to stop production until the prices were back up. However, as will be discussed below, Buist had built a capability in fine and medium twist yarns and workers had gained experience in making them; therefore going on short-time would result in loosing those key people, something that management were keen to avoid even when there was great pressure from other firms in the industry to join the short-time movement (see Section ?? in this chapter).

To summarize, a judicious management in procuring jute and selling yarns played a major role before and during the inter-war years. The high levels of fluctuation within the jute and yarn markets made such a management vital in the firm’s operation. It helped the firm in two major ways: firstly, to overcome the high level of uncertainty within the market by procuring raw jute and selling yarns at a reasonable price and secondly, to secure a better quality of jute which was important in making the higher quality yarns, as will be discussed below. Yet, the policy of ‘hedging’ was not developed to deal with international competition. In order to meet this challenge, Buist laid special emphasis on developing the spinning technology. The following section describes their efforts in details.