Private Selling Of Wool Condemned

Press, Volume CVI, Issue 31196, 21 October 1966, Page 16

Private Selling Of Wool Condemned

Private selling of wool by growers would only lead to a host of new troubles under which the grower and the country could suffer grevious financial damage, says the 66th “Annual Review” of Pvne, Gould, Guinness Ltd.

It would not cure marketing problems or lead in any way to orderly marketing.

The journal says that the extent of private selling had now grown to the stage where the future of the auction system could become endangered. Private sales of greasy and scoured wool had increased from 134,516 bales in 1961-62 to 235,580 bales last season.

“These figures are telling enough as they stand, but they have an even greater impact on auction prices in actual practice because:— “(1) No buyer completes a private purchase unless he can obtain wool cheaper than he thinks he will have to pay at auction.

i “(2) The quantity bought I may not be very great and get little overseas publicity, but the price paid gets a ton of overseas publicity as the nature of the overseas purchaser leads him to proclaim to his colleagues, without disclosing the quantity, that he has bought type XYZ at a ‘handy’ price and so many pence or cents cheaper than current auction quotations. Then what happens? The colleagues revise their ideas downwards and the next New Zealand auction starts under a cloud. There is no doubt that a cheap purchase of 100 bales of one type can seriously affect the hundreds and hundreds of bales of that type and its interlocking brothers in the next auction. Basic World Price

“It is a fundamental truth | that an open wool auction, attended by representatives of the world’s wool interests, policed by conditions of sale and regulations, limited as to quantity consistent with estimated demand, and preceded by a set pattern of adequate sample display, is the correct method to obtain a basic world price—provided no unwarranted outside influences intrude. Large private sales are indeed an outside influence. “It is another fundamental truth that if there were no properly established auction basis of value, there would be no yardstick for private treaty, and unfortunately the

mouse nibbling at the bottom bags can topple the whole stack.

“Now what are the reasons for making a private sale? We think there are two main ones.

“(1) Cost of selling by auction. Every marketing cost is set out on the list of charges on an auction account i sales. Fundamentally the extra cost above private treaty on last year’s average of 41.62 d per lb was 1.35 d per lb. All the other charges for railage, cartage, sorting, levy, etc., are contained in the private bid no matter how carefully disguised. "For this 1.35 d charge the auction seller obtained proper display and handling in a specially designed warehouse of high capital cost, full protection of all his interests from guaranteed weighing through all the requirements of the conditions of sale to payment in full before his property passes and world competition at open auction.

“(2) A bearish outlook. Fundamentally the private seller must be backing the market down whilst the private buyer is either offering a ‘cheap’ price on the day or backing the market up. Need for Cash “Other reasons are advanced for private selling. One is the need for ready cash. But there is little in this reason as any wool selling broker is always ready to make a realistic advance against wool held in his store: and there is little in any other reason.

“We ourselves could, of course, get behind private selling and foster the practice to a considerable degree—and indeed be, on the immediate face of it, temporarily better off without capital building costs and labour problems. “But we are categorically against private selling; we fully support open auction: we consider the open auction is in the best interests of the grower and of the community.”