Stock Firms Against Wool Acquisition

Press, Volume CVIII, Issue 31768, 27 August 1968, Page 22

Stock Firms Against Wool Acquisition

Any wool acquisition scheme would be detrimental to sheep farmers and to the country, the New Zealand Stock and Station Agents’ Association and the New Zealand Woolbrokers’ Association have said in their joint submission to the marketing committee appointed by the New Zealand Wool Board.

They objected strongly to the proposed appraisal and purchasing system in which a specially constituted authority would buy all wool and then sell it through existing channels.

“While we are concerned with fluctuations of sheep farm incomes which have an adverse effect on planned development, it must be realised that wool provides only a part of a sheep farmer’s total income. It was less than 40 per cent for three seasons before the last one when it fell still lower,” the associations said. “While the value of wool has affected past meat schedules, and there is some reflection of current wool prices in store sheep values, available feed and the current dead meat schedule exert a far greater influence. “Planned development of sheep farming must centre on accurate forecasting of sheep farm income. A reduction in wool fluctuations would help this forecast but it would not go nearly far enough. “Under the existing farm income equalisation scheme farmers can voluntarily adjust their total farm incomes each year. Already an unusual surplus from a windfall year, whatever the source, can be stowed away for the future.

“Previously the desire to avoid taxation led sometimes to reckless expenditure of such unusual surpluses on tax-deductible items or on launching development schemes of an over-grandiose nature.

“Price levels of synthetics must have a bearing on wool prices and will tend to contain extreme fluctuations,” the stock agents and wool brokers said.

“Manipulation of appraisal prices over the years will not result in increased returns to growers as the scheme would be self-balancing. In fact, returns to growers could be less over all because of the costs of operating the scheme.

“Control of the flow of wool on to the market by the acquisition of stocks could be most expensive. Major withdrawals through ‘passings’ could discourage the use of New Zealand wool. If the authority were not prepared to meet a falling market, it would become a stock holder on a large scale, thus causing imbalance in the supply situation.

“Wool growers In New Zealand have to realise that any arbitrary control of the sale of wool by a single authority as against a. free marketing system could alienate buyers of New Zealand wool as New Zealand does not, and could not, dictate in any way the price of an international commodity to international buyers.

“We do not believe that stability of price levels can be achieved, whatever the stocks or reserves, as New Zealand’s total wool production is only a small percentage of the total world population.

“Reasonable reserves might

achieve a greater degree of wool income stability but this would be ‘within season’ only. If there were a serious drop in demand and values as occurred last season, it is questionable whether an authority could continue to buy wool at stated prices. “If acquisition proposals were adopted the establishment of the seasonal pay-out price would be the most important and most difficult of the authority’s decisions. “The long-term, break-even, over-all average would have to be achieved. Also, within each season and prior to that season, the authority would need to lay down the relationship between each quality number, each style and each length. “With the mechanics of acquisition as envisaged, the grower would expect a situation enabling immediate comparison of the appraised price for his different categories with their actual market realisations at auction.

“Even if friction and pressure could be avoided over the particular season’s overall average, there could never be grower harmony on the predetermined relationship between quality, style and length. Hindsight has taught us that it is impossible to predict this relationship wihch is constantly changing.” Reserve Prices

Referring to the recommendation that the authority would require a market intelligence service to advise on flexible reserve prices when selling to the trade, the associations asked: How flexible is flexible?

“A broker responsible to his grower is flexible to the extent of insisting on a fair market price while his catalogue is selling. If the authority were less flexible and passed large quantities in anticipa tion of a possible rise in a month or so, imbalance in the supply situation could result with harmful effects to New Zealand wool.” Both associations agreed

with the Wool Marketing Study Group that “as a means of distributing the bulk of the wool clip to users, the auction system is considered to be the most effective method.” This was also the view of “all previous reviewing bodies in Australia and elsewhere.”

While no changes were really required in the basics of the present auction system, improved preparation of wool for sale and standardisation of types were being implemented in co-operation with the Wool Research Organisation at Lincoln and the Gov-ernment-sponsored Wool Handling Committee. Flow of wool to market was regulated by the Wool Auction Sales Committee.

“Certain special types of wool may not be spread evenly throughout the selling season,” the association stated. “Such a spread may be desirable but the cost of achieving it could erode any gain in price.

“Some inconsistency in price difference for style and quality number is inherent in any marketing system, whether by appraisal or otherwise Such inconsistency can be a deterrent to proper preparation and to better breeding and farm management practices.

“But at present there is as much, or more, wrong with the cross-breeding of sheep and of sheep husbandry in many areas as there is with the preparation of wool for sale.

"Brokers are continuously improving handling methods and reviewing cost structures with the object of presenting wool in ways that will ensure maximum returns for growers.

“Important examples are mechanisation of wool store procedures, unitisation, improved packaging and denser dumping. “Through the use of scientific measurement, brokers are endeavouring to reduce the number of bales that need be ..howTi in any lot.”

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