Two-tier system of wool payment

Press, Volume CXV, Issue 33964, 3 October 1975, Page 6

Two-tier system of wool payment

These days the farmer is likely to draw his wool income from two sources —the buyer and the New Zealand Wool Marketing Corporation, writes a special correspondent from Wellington.

He is involved in a new price stabilising system, receiving perhaps a little more for his wool this season, but pledged to repay any debts when prices rise. The minimum he will receive this year is based on a schedule averaging 124 c per kilogram. In the winter sales the market averaged only 116 c. The difference, paid as a supplement, amounted to more than $ 1.25 m and it was paid out on 61,000 bales.

Spread over the offering, it was an average of lie per kilogram, but as some wools did not require supplementation, the average paid to recipients was 14c. In many individual cases, particularly for halfbred wools from the South Island, it ran as high as 35c to 40c.

Many farmers would hardly realise they were getting a payment from the corporation. With their wool cheque, they receive an account sales from their woolbroker, setting out the sale receipts, less his charges and the Wool Board levy. At the bottom, they may find a note that supplementary payment, if applicable, is included in the price.

That means their wool price is not what was bid from the buyers’ bench, but was determined by a Wool Corporation appraiser, clipboard in hand, going through the wool stores alongside the ■ buyers. While the buyers’ valuations are based on today’s market, ■ the corporation’s are based on the 124 c schedule.

Woolgrowers’ representatives have recently been arguing about the merits and cost of “smoothed” prices set by appraisal. The Wool Board and the corporation believe the present level will not incur too great a deficit for growers to repay in the future. The man administering the scheme is Mr A. J. N. Arthur. A qualified woolman, he was formerly in charge of the corporation's London office. He explains how the growers are paid and the books balanced: “When our appraisers go through a store, they mark up a catalogue with the minimum prices and give it to the broker. Where the market price is below the minimum the broker pays the grower the minimum and debits, the corporation with the difference. “If the farmer ships his wool to Britain to be sold at the Bradford auction, the procedure is exactly the same. Our agent there values the wool on our price schedule and attends the sale. Then London Wool Brokers here in New Zealand invoice us — in New

Zealand currency — for the supplement due. “Things are a little more complicated when the fanner sells to a private buyer.

“Two things can happen. The buyer may pay the grower what he estimates is our minimum floor price for that type of wool. Then he has the wool valued by our appraisers and they pay him the supplement it would have earned had it been sold at a current auction. The buyer keeps the supplement. He may make or lose a little, depending on how the market has moved since he settled with his farmer client. “The second alternative is for the buyer to pay the farmer a market price. The wool is then seen by our appraisers and the supplement (again based on current auction and our schedule) goes via the buyer to the farmer.

“The small country wool buyer, picking up a few kilograms at one farm and a bale at another, will probably adopt the practice of paying fanners his estimate of the corporation’s, floor price. Then he will group the wools from many farms together to make up lines which he can display for appraisal and supplement, or sell them to a larger buyer for similar treatment,” said Mr Arthur. “There are several things to note about all this:

“First you will see that our supplement is based on auction. What the buyer may pay the farmer does not come into it. If the farmer sells too cheaply and gets a supplement which does not bring his realisations up to the minimum price, that is his misfortune. His precaution should be to read the schedule of prices we have posted to all farmers.

“The second thing is that the wool must be displayed properly for our appraisers. The Federation of Wool Merchants is arranging for this in the sales centres, and wool scours may also apply to be used for the purpose. We are invoiced for supplements by the convenors of those display facilities or the management of the scour. “Of course, it costs money to display wool. The buyer has to take that into account in setting his price. “With brokers, we work on a sale-to-sale basis. We settle up on prompt date as do commercial buyers. “With private buyers it is

more complex. We pay out when they deliver to scour, dump store or local mill. We have to see ■ a delivery receipt which ensures we are not being asked to pay on the same wool twice! “Finally we inspect the books and purchase dockets of brokers and private buyers. We have been doing this for some years to make sure the Wool Board levy has been paid and now also to see that the supplement has been passed to the farmer.” Mr Arthur stresses how much the system depends on the co-operation of the trade. “The farmers owe a lot to the people who handle all the paperwork,” he says. They also owe something to the corporation’s computer which keeps track of the statistics. Al) are likely to be busier in the months ahead if supplementation continues. The August sales total about 100,000 bales. Monthly totals are two and three times as great between November and May.

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