Aim to spread flow of wool

Press, 20 July 1979, Page 8

Aim to spread flow of wool

A recent research report from the Agricultural Economics Research Unit at Lincoln College examines the problems associated with peak flows through the New Zealand wool marketing system, and outlines various strategies for smoothing these peaks. The report, prepared by Ms Sandra Martin, represents part of the unit’s programme of research aimed at providing the data necessary for attempts to hold or reduce marketing costs for New Zealand’s agricultural exports. It indicates that manufacturers ideally require a steady supply of wool over the manufacturing season. However, the actual supply of New Zealand wool is highly seasonal. Although comprehensive information is not available, sample survey data for the South Island shows that the majority of wool becomes available in December and January. The movement of wool through the marketing system reflects this supply peak, with seasonal patterns evident for auctions as well as private wool sales. Consequently, peak demands are also made on scouring and dumping facilities, and on shipping capacity. Such peak demands are costly compared with those which would be associated with a steady supply pattern. One of the possible smoothing strategies outlined in the report is a system of differential charging by brokers. Under such a system brokers’ charges would be higher than at present in the peak period, and lower in the off-peak period. Growers could respond to such a strategy by altering shearing patterns, or by storing wool. The payment of a storage

increment similar to the British system is examined and evidence of considerable on-farm storage capacity on South Island farms is presented. Results which suggest that growers might be quite responsive to such a strategy are also outlined. An extension of the “Extra Choice” concept — where growers have the option of selling wool to the New Zealand Wool Board in certain circumstances — is also con-

sidered, including a system where this alternative might be instituted in conjunction with differential charging by wool brokers. Sale by separation is suggested as a method of smoothing short-term peak flows that might otherwise remain if any of the previous alternatives alone are instituted. Acquisition of the wool clip by a central marketing authority is also discussed. Finally, areas of research which would rectify data

deficiencies and allow for a more rigorous evaluation of these alternative strategies are identified. When such information is available, it will be possible to calculate the economic costs and benefits to each marketing activity for each policy alternative, or with combinations of different policy alternatives. In this way, the total savings to the entire wool marketing system can be calculated, and the net savings to each particular marketing sector can be examined.