Intervention pricing policies discussed

Press, 4 August 1987, Page 50

Intervention pricing policies discussed

PA Wellington The Wool Board and the New Zealand Council of Wool Exporters have met to discuss intervention pricing policies before the start of a new wool auction season.

In a wool market preview, the council said the meeting came at a critical time for wool marketing. The council’s president, Xavier Droulers, said that big price increases for New Zealand wool last season had largely been carried by exporters and were now being reflected in prices asked of overseas customers.

“Many of our customers are now exhausting all other available sources of supply before meeting these prices,” he said. “It is vitally important that they see New Zealand prices as being solely the result of a genuine increase in market demand. If they perceive it to be partly the result of producer board intervention in the market, they will ignore the demand and supply factors and focus their annoyance on New Zealand as a supplying country.

“No customer likes a pride increase, but it is

twice as painful if it is seen to be a result of manipulation by the supplier.” Mr Droulers said this concern was discussed at the meeting with the board. “The board made it clear that its intervention in pricing policy was geared to achieving maximum returns for New Zealand growers at auction. “At the same time, the board recognised that the intervention level has to take account of world supply and demand factors.” The council agreed that the priority for both growers and exporters was to maximise returns for New Zealand wool, Mr Droulers said.

But it emphasised that prices at auction had to be allowed to fluctuate to some degree if the auction was to perform its price-setting function.

“We told the board that they had to strike a balance between this and their desire to put the peg in at a certain price level.” Mr Richard Mercer of Maircom (N.Z.), Ltd, Christchurch, said the recent fall in the dollar

would see a realignment of market forces. “Our overseas customers will be seeking to share in the benefits we get from a falling dollar, but this will tend to be offset by the desire of exporters to recoup their losses of last season and the desire of the Wool Board to ensure that growers get the full benefit of the devaluation of the dollar.

“Only a limited amount of wool has been sold at auction in the last two months and prices have largely reflected the demand for this limited supply from local mills and scours.”

Very little of this wool was bought for direct export overseas at those prices. “The fall in the dollar from US6IC to US59c would, in my view, have merely removed the premium local mills were willing to pay for offseason supply. Any falls in the dollar below this will tend to be reflected in auction prices." Mr Simon Kitto, of Cargill Wools, Wanganui, said he expected auction prices to remain firm in the weeks ahead.