Stability Urged

Press, Volume CIII, Issue 30442, 16 May 1964, Page 14

Stability Urged

A belief that fluctuations in wool prices were acting against the interests of the industry and were doing it serious harm was expressed at the annual conference of the South Island Wool Association at Lincoln College yesterday by Professor B. P. Philpott, professor of agricultural economics at the college.

He suggested that it would have been a good thing if a world-wide wool commission had been operating over the last few years to hold the price of wool at its true level.

Professor Philpott said that the actual price of wool fluctuated up and down in a cyclic movement around the true equilibrium price or true annual price that should be charged for wool to clear the market, and this in itself was damaging enough to woolgrowers and the wool trade.

The true equilibrium price this year was about 50d compared with the actual price of 55d per lb. True equilibrium had been slowly rising for the last few years, while ever since 1960-61 the actual price had been well below it —by as much as 7d per lb. This was the period in which mills had been slowly drawing down on stocks and s© depressing the price of wool below its true value. Conjecture “I should like, therefore, to put forward the conjecture that in this period it would have been a good thing if a world-wide wool commission had been able to hold the price at its true value — perhaps between about 44d and 49d per lb—which would have meant that it would have had to hold stocks which could have been released this year, when they were urgently required, at about 50d per lb. “I think if one did the calculation one could show that four years’ clip at 50d per lb

would be worth more than four years at 40d, 39d, 43d and 55d which has been the case over the last four seasons.” He said there would be a further long-run gain from the sort of thing he was suggesting. By keeping prices fairly stable and at a reasonably good but true equilibrium level, wool production would have been encouraged instead of slowing down as it had, and there would not have been the situation which had developed this season of the mills suddenly finding their stocks at bedrock level and having to bid up the price to boom levels to get supplies at a time when there was barely enough wool to go round. Synthetics Benefited The ultimate and only benefactor from all this was the synthetic fibres whose penetration of the market had probably been permanently enhanced. Answering a question, Professor Philpott said he believed that in a relatively short space of time Australia, South Africa and New Zealand would all operate a floor price scheme. He said he thought when the wool marketing committee in Australia reported shortly it would be moving in the direction of a floor price scheme, but until all three countries came in it would not be possible to raise the floor price to realistic levels.