Aim Of More Stability In Wool Trading

Press, Volume C, Issue 29566, 15 July 1961, Page 7

Aim Of More Stability In Wool Trading

TN a deliberately provocative address to the annual conference of the Massey College Wool Association last week Professor B. P. Philpott, professor of agricultural economics at Canterbury Agricultural College, outlined three wool marketing schemes designed to eliminate the unsettling short term fluctuations in wool values though still having due regard to long term trends. "Admirable and efficient though the New Zealand Wool Commission is, it cannot really be claimed that its operations have greatly reduced the effect of price fluctuations as far as the New Zealand producer is concerned,” he said. “Nor. is the commission ever likely to be able to do so as long as it has to ‘go it alone.’ But even assuming that it has to continue going it alone the commission could be used as an instrument to iron out the effect of fluctuation on the producer.” The modified Wool Commission scheme which Professor Philpott has in mind is for the marketing of wool to continue as at present but for some expansion to be made tn the commission’s

appraisement services with growers being paid on the basis of appraisal value rather than on the market value. At the end of the season growers could be paid a bonus equalling some proportion of the difference between the appraised price and the season’s average auction market price with the balance to be put in a reserve against years when the appraised price exceeded the average auction market price. The major disadvantage of the scheme was that nothing was done to reduce the effects of fluctuations as far as' raw wool consumers were concerned. That required a “buffer stock’’ scheme. Such a scheme, he said, would have to be a joint operation mi the part of the major wool producers. At the beginning of each season the buffer stock authority would announce the average price for the clip and either side of this average a ceiling and a floor price. It would stand ready to sell wool at the ceiling price and buy at the floof price so confining fluctuations to the range between these limits. Great Care “The average price selected each year would need to be chosen with very great care,” said Professor Philpott “If it was too high the buffer stock authority would find itself continually accumulating stocks over a period ot years, and these would ultimately have to be sold at a loss, and if the price was too low it would slowly run out of stocks. The most important requirement of the scheme is that it should engender confidence in the trade, particuHai'iy in its ability to hold the floor price indefinitely." Such a scheme would require initially a large capital wbigb at a recession in prices would be transformed into a baMKced stock of wool of various types. The final scheme he had in mind envisaged a marketing authority prepared to carry larger stocks for longer periods than the buffer stock authority and which could make sharp unequivocal but infrequent changes in price (as with synthetic fibres) It could, over a long period, successfully maintain a balance between world wool production and consumption with prices completely fixed

for two or three years at a stretch. A scheme of this type, he said, could lay the basis for a revolution in the preparation of wool for market and in a narrowing down of the number of types produced and in uniformity within those types. “A marketing authority which could quote fixed prices for stated standard lines of wool sorted to specification, and if possible available from stock in the main textile producing centres of the world, would really be meeting synthetic fibres on their own terms,” he said, “especially if the price quoted carried the Implicit guarantee that it would not be reduced or raised inside some stated period.

“As I see it, the three schemes represent three stages in a progressive improvement of our wool marketing procedures and I see no reason why we should not start on the first scheme immediately and that something of a similar nature will emerge in Australia as a result of the present Royal Commission. The ground would then be laid for studying carefully a possible joint move towards the buffer stock scheme and ultimately to the third schema. A precondition for success in either the second or third schemes is a lot of economic research into wool marketing and factors affecting wool prices. . .