Some Loss Expected On Wool Stockpile

Press, Volume CVIII, Issue 31763, 21 August 1968, Page 26

Some Loss Expected On Wool Stockpile

(New Zealand Press Association)

WELLINGTON, August 20.

The present outlook was for some loss on the Wool Commission’s stockpile of wool, the chairman of the commission (Mr E. L. Greensmith) said today.

Addressing the electoral committee of the Wool Board he said that with so much fluctuation in auction prices and a disposal period of probably several years, it was not practicable to be exact about losses or surpluses.

But, he said: “The present outlook is certainly for some loss."

The commission had absorbed a great deal of the shock of severe price falls and in this way had rendered an important service to the woolgrowing industry. Mr Greensmith said It was certain that there would be a substantial reduction in the commission’s capital reserves whether or not there were large losses on wool stocks. The commission’s capital reserves stood at s74m two years ago but the latest balance sheet showed that the commission’s assets were now "overwhelmingly” represented by wool. “The value of this asset must until resale be a matter for conjecture,” he said. This raised the question of the commission’s future role in assuring minimum prices to growers. A Speculator

The commission had been considering this question but a lot depended on whether

the industry would accept that it must have a more modest level of support, as applied until recent years, and that the commission would be in effect a speculator on the industry’s behalf. This would mean buying when prices were low and selling when relatively high, Mr Greensmith said. The value of wool sold to commercial buyers in New Zealand in the 1967-68 season was sl2om compared with slolm in the previous season. Mr Greensmith said the market for New Zealand wool had improved slowly during the four months of the 1967-68 season since the committee last met.

He said the supplements to growers to make good the deficit between market and minimum prices during the last season cost the commission $8.67m.

Devalued Currency At the end of the season, fleece wools were about 35 per cent above the price levels prevailing just before devaluation and second shear fully 15 per cent. However, these prices were in devalued currency. Of the 1,571,939 bales sold at an average of 22.9 c per lb, 49 per cent, or 761,943, were supplemented.

The average supplemenl was 3.1 c and the average return to the grower 24.4 c per lb.

“The assistance which has been made available to grow ers in their very difficult circumstances is slender in comparison with the help extended to wool-producers in other countries, particularly the United Kingdom and the United States.

"It is a matter for regret, too, that the finance has to come from what are virtually the industry’s own savings,” Mr Greensmith said. Production Higher The production of wool last season was 2.6 per cent up on the previous season at 728,265,0111 b. Production during 1968-69 is expected to reach about 740m1b greasy. This is a 1.6 per cent rise over last year’s level but is less than the increases over the last few years. “A slackening off in the rate of increase in the clip is the natural reflection of the current lower returns from wool as compared with those achieved a few years ago,” said Mr Greensmith. Mr Greensmith said New Zealand’s chief competitors, the Argentine and Uruguay, also had to contend with severe price falls but without the cushion of floor prices. As a result their production over the last two seasons had dropped by nearly 3 per cent.

None Offered

On June 30 last the commission's stockpile totalled 687,826 bales. During last season it did not sell or offer any of its 1966-67 wool in line

with its policy of not selling any wool from that year at less than purchase price. It did however sell at New Zealand auctions 14,789 bales

of 1967-68 wool and made a surplus of $92,000 over purchase and all expenses. “The 1966-67 purchases, having been more costly than those of 1967-68, appear less likely to produce such a good result,” said Mr Greensmith.