Wool Board pays out $42.5M as stockpile trebles

Press, 1 November 1985, Page 3

Wool Board pays out $42.5M as stockpile trebles

PA Wellington The rising value of the New Zealand dollar has cost the Wool Board at least $42.5 million in the last four months while its stockpile has trebled, said a board source yesterday. The volatile currency situation is creating considerable uncertainty in the industry, bringing the board in to purchase stocks and keep up returns to farmers. The board bought 86,000 bales, representing 30 per cent of the 284,000 bales offered since July, stepping on to the auction floor when prices dropped below a certain level to buy wool it later sells at market value. A Wool Board source said bales were worth about $5OO each. On this calculation, 86,000 bales would fetch about $42.5 million.

The Wool Board’s chairman, Mr Doug Mcllraith, yesterday told the meat and wool section of Federated Farmers that the board would vigorously defend prices in times of downturn. While it was not the board’s intention to withhold large amounts of wool from world markets, a reduction in board price support levels earlier this month had been negated by currency movements within only days. Mr Mcllraith said the signs were ominous for the wool market if the New Zealand dollar remained at is present level. “All the demand we have built up with the international industry, and all the money we have paid to build up the demand, is going to waste,” he said. “We should be achieving

returns on our investment and higher domestic prices for our wools. “We are not, and high interest and exchange rates are the main reason why we are not,” Mr Mcllraith said. He told fanners not to let any decline in confidence in sheepfarming extend to wool production.

There was still considerable international demand for New Zealand wool and it was not in oversupply. “Current market signals are simply a reflection of the effect of high exchange and interest rates in artificially reducing the prices bid in New Zealand dollars for our wools/’ Mr Mcllraith said. They did not reflect the

strong level of international demand for the fibre New Zealand produces. “There is still every reason to have confidence in wool and the returns it will achieve,” he said. As the biggest incomeearner for farmers, wool could help to carry them through their present situation. Farmers should therefore maintain their level of wool production and quality control, wherever possible.

He warned farmers not to cut quality control as they attempt to reduce farm costs. Quality control originating from wool preparation in the shearing shed was an important plank in the marketing of New Zealand wools.

“As such, it is an important factor in the price premium our wools attract compared with those of competing producers. Any short-term cost cutting which reduces quality control is a false economy that will do nothing but harm.” Mr Mcllraith said that the Government’s policies had already created a “quite unnecessary crisis in sheepfarming confidence.” Sheep numbers had already fallen 3 per cent in the 12 months to June and were forecast to fall further. Fertiliser applications were expected to drop by 35 per cent. Wool production levels this season would be the lowest in seven years, said Mr Mcllraith.