WOOL RETURNS

Dominion, Volume 31, Issue 151, 23 March 1938, Page 14

WOOL RETURNS

Operation Of Antwerp Market ADVANTAGES CLAIMED Claiming that the Antwerp wool futures market offered security to woolgrowers as well as to sellers, Mr. N. Scheinwald, New Zealand agent for the Bel"O-Australian wool company, Richard Fuhrmann, Ltd., stated in au interview with “The Dominion” yesterday that many. Australian woolgrowers and wool merchants had already realised the benefits which they could derive from the futures market. Woolgrowers had frequently found, said Mr. Scheinwald, that, while their wool was awaiting its turn to come up for auction the market had declined and that they had missed the better prices ruling earlier in the season. . The practice of “hedging” their clip in the Antwerp futures market would protect growers against risks of declining values, whilst leaving them free to sell their wool through the best of all selling systems, the New Zealand wool auction sales. A simple example would render the matter clear, said Mr. Scheinwald. A woolgrower who finds that prices ruling iu the wool market at a given moment would be satisfactory to him, and who, for any reason, is not iu a position to offer his wool for auction at this same market, can, by using the futures market, insure himself of practically the, equivalent of present-day prices and eliminate, to a very large extent, the risk of suffering a loss should prices decline before bis wool may be offered for sale. If they estimate that, on the basis of prices ruling at the moment in the Australian market, their wool should be worth, for example, £sooo—they will contract to sell for delivery on a distant month, through an accredited agent, a quantity of “wool futures tops” amounting to about £5OOO in value. Should wool values decline, for instance, by 10 per cent., by the time their wool is offered at auction, growers will find that instead of realising £5OOO for their clip they will realise only £4500. But the futures market, which fluctuates in accordance with the situation of the wool trade, will have declined in approximately the same proportion. Therefore, the grower who has sold “short” wool futures tops for delivery on a distant month will find himself in the position of being able to repurchase his short sale with a profit which will approximately cover the loss which he has suffered on the actual sale of his wool.

Furthermore, said Mr. Scheinwald, ns it is possible to effect sales or purchase in the Antwerp futures market for delivery on current month and on any of the following seven months, this means that growers no longer await the opening of the Australian wool auctions to insure themselves of any. favourable level of price which may rule in the wool trade. Should prices in the futures market rule at satisfactory levels during July or August (at a time when there are no auctions in Australia) growers could sell forward an amount of wool tops corresponding in value to what they estimate their clip would realise if it were possible to sell it at that moment.

This amply illustrates the excellent conditions offered to the grower or seller. The reverse side of the case, of course, presents itself to the buyer, whether purely a broker or a manufacturer. In like manner, it is possible for him to buy today what he will accept delivery of, say, seven months hence, and thus secure the advantage of low prices for delivery at his own convenient point of time without suffering the inevitable loss attendant on waiting to buy when the market is ris-., ing.