WOOL MARKETING

Ashburton Guardian, Volume 53, Issue 212, 20 June 1933, Page 8

WOOL MARKETING

NEW ZEALAND AND ARGENTINA. A FORMIDABLE RIVAL. Modern requirements of wool marketing was the subject of an address to the Economic Society of Australia and New Zealand, in conjunction with the Farmers' Union, by Mr L. W- Bagley, recently. In order to gain the true perspective as to why changed wool marketing methods were necessary, Mr Bagley said they could profit by an investigation of historical facts on which to base their premises. The study of the index of raw wool prices in the wool survey issued by the Empire Marketing Board revealed that for the 15 years' period from 1890 to 1905, the average level of prices way well below par, while in the following 24 years the average level of prices was well above par. Par was taken from the average price level ranging from 1909 to 1913. In the past four years, however, prices had again consistently receded to extremely low levels. The movement of prices showed the index in 'regard to crossbred, New Zealand, greasy, medium 46's on a clean, scoured ba.sis, London, for the end of March in each year. Ninety-eight per cent of the wool produced in New Zealand was crossbred and 2 per cent merino. Generally speaking, crossbred referred to wool up to 60''s count, and merino to wool finer than 60's. Unfortunately carped wools in New Zealand had gradually decreased in quantity owing to various climatic, constitutional and economic factors. This Avas sufficient to justify the definite statement that, whereas for 24 years from 190 G to 1929 woolgrowers sold on a sellers' market, yet for at least 13 years before 1906 and since 1929, woolgrowers had faced a buyers' market. There was as yet no very definite signs visible on the economic horizon which would point to- anything but a probable lengthy duration of a buyers' market for raw wool.

The main question naturally arose: Were the present methods of marketing wool in this Dominion capable of efficiently serving a buyers' market? From 1900 to 1905, which were the last five years of the previous buyers' market, the average number of bales of wool shipped overseas per annum was 391,000, of which the average sales in New Zealand accounted for 119,000 bales, or 30.4 per cent of the total wool exported. During the last five years of the sellers' market period, 1925 to 1929, the average annual overseas shipment was 638,000 bales, of which the quantity actually sold in the Dominion averaged 517,000 bales, or 81.1 per cent of the wool exported. In other words, the proportion of local sales of wool fo overseas shipments increased during these favourable years by 165 per cent, or from 30 per cent in one period to 81 per cent in another, while in quantity they increased 300 per cciif. Buyers of wool in order to get their supplies had to travel thousands of miles to compete on the producers' market or else arrange for local buying agents to procure their requirements on a commission basis. These bikers were also compelled when in New Zealand to travel by rail and steamer over 8000 miles, visiting eight towns from Auckland to Invercargill, and to attend 29 sales; value arid compete for 197 catalogues of wool in only 129 days.

The South American System. During the sellers' market buyers fell over one another to compete for the wool, and were ready to overlook defects in the .system of presentation, whereas to-day on a buyers' market they had to be-catered for more assiduously by the woolgrowers and brokers in order to attract competition at even, lower price limits. This Dominion was faced with intelligent competition from other countries producing a similar type of wool and grown at a lower cost. In South America, for instance, the system of marketing was very different from out central .auction system, and it allowed the dealers or wool houses in these countries to offer properly-classed wool, mostly on a guaranteed clean yield basis, to the overseas buyers and manufacturers. In South America the wool was either sold locally or, in the case of the larger or more up-to-date growers, it was shipped for sale to overseas markets. About 80 per cent of the exports were sold locally to local dealers composed of 26 to 30 firms, whereas approximately 20 per cent was shipped direct to London or other overseas markets by growers. In this relationship of local >sales to exports it approximated New Zealand. The preparation for the local market was entirely different from that required for overseas. The overseas requirements 'were more or less known to Now Zealand, and therefore needed no explanation. The Buenos Aires Central Produce Market accounted for onethird of the national production, and was housed in a tremendous building which offered storage capacity for about one-half of the country's clip, or in weight nearly equal to the total average quantity sold in New Zealand. There the procedure was to show the wool and conduct the sales all under the one roof .and with the wool entirely removed from the packing covers. The fleeces were arranged in great rectaagular piles averaging about eight to nine feet high around which the* buyer could, walk and so make his tests on all sides. In the market the sale was generally effected by private treaty between the buyer and the selling agencj. Jn the sheds of the Argentine dealers the sorting, skirting, sampling and baling for the country was done. Practically speaking, no buyers from abroad attempted to do business in the (Jontral Market or in the. interior but bought from the local firms. A local wool house purchased either lor its own account or acted as agent for foreign companies. It sold either to wool merchants or to manufacturers abroad. There was also a group of dealers known as "assemblers of wool," who transacted their business outside the central market, purchasing the clips of the very small growers for. cash. Argentine wool was sold on a guar-

anteed clean yield basis by tlie wool dealers or brokers to the wool merchants or manufacturers in the consuming countries. In comparing the New Zealand method of marketing with that of the Dominion's important .rival they found—(l) That while New Zealand growers got all the benefit of classification as it was at present carried out in New Zealand, in Argentine the benefits from classing were reaped by the local wool dealers who did this work. (2) While our growers had to bear comparatively heavy charges for handling and classing and packing, the charges to the Argentine growers were almost negligible. (3) This seemed the most important point of all when facing a buyers' market. Although the Argentine growers did not reap all the benefit the same buyers of New Zealand wool could purchase South American wool instead, definitely graded to their known (requirements and on a guaranteed clean yield basis. (4) The Argentine still enjoyed about a 9 per cent advantage" over New Zealand in the' exchange rate with London.

New Zealand's Disadvantage. Therefore the South American method of dealing with overseas consumers had the advantage over Now Zealand's method in that their system had made buying easier. The trend of the Argentine wool over a number of years had been toward finer quality. This was. noticeable in studying the types produced over the seven years from 1924 to 1931 in the wool survey of the Empire Marketing Board. The coarse grades of crosshreds were gradually being replaced by finer types. In approaching our quality of crossbred wool we found the Argentine gaining ground. . Because buying was made easier for Argentine wool, the foreign consumers could buy direct without the wool passing through Bradford hands, as in the case with 31 per cent of New Zealand imported wool. In other words, our growers through our present marketing methods were being robbed of the profits made by these Bradford topmakeiis and merchants who resold the wool to foreign countries. Among other things these facts showed vividly that while the Dominion relied on the United Kingdom to take 71 per cent of the wool exported other competitors were definitely gaining ground. Reciprocal trade with the United Kingdom was of vital importance to the woolgrowers of the Dominion.

In crossbred wool Australia had tlie advantage over New Zealand of centralised marketing, a greater spread of selling season, tlie increased competition of more buyers and direct tshipment with the Far East.

If the wool selling brokers voluntarily brought about a Dominion standard of classing, Mr Bagley said, better presentation of the wool and lower charges, there would be no need for the Government to increase to any degree their services to woolgrowers. The brokers and growers might need the cover of legislation to enable the standard of classing to be introduced and upheld. This might lead to the formation of a wool marketing board, comprising representatives of brokers, growers, and buyers, which wcfUld take over the duties of the present Wool Committee, maintain' the standard of classing, -license, dossers, guarantee the yield, and co-operate in shipping with the Meat or Dairy Boards. In the early stages highly qualified wool experts as supervisors should be sufficient to see that the standard of classing was maintained in New Zealand. He could not agree that any fear of State control was well founded in regard to this Dominion. The Government could assist the woolgrowers to gain the financial benefits resulting' from rationalised marketing services. Its duty seems to lie in firmly encouraging the recognised wool selling brokers to bring about these necessary improvements .voluntarily, giving where necessary protection and unfettered assistance. The responsibility lay directly with the Government of the day in seeing that every possible effort was made to improve the lot of one of our key industries, the woolgrowers of the Dominion.

Mr Bagley dealt with a number of other important aspects of wool marketing. "Summed up," he concluded, "and' using a colloquial term, the Argentine has us 'beaten to a frazzle' under our existing methods of marketing wool, and immediate reforms in New Zealand are imperative."