FORECAST OF WOOL PRICE TRENDS

Grey River Argus, 13 September 1948, Page 7

FORECAST OF WOOL PRICE TRENDS

WELLINGTON, Sept 10. Though he found no one ..in Britain willing to predict the course of the wool market, Mr G. A. Duncan, chairman of the New Zealand Wool Disposal Commission, who returned recently from London, heard opinions there that prices would probably hold for the first half of 1948-49, but might not be maintained beyond then.

In giving this information to the annual meeting of the New Zealand Wool Board, with its electoral committee, Mr Duncan said it was known that trade stocks had run down to about seven months usage, with Merino stock lower relative to consumption than crossbred. Government owned stocks of apparel wool had been reduced "by 50 per cent, since 1946, whilst commercial stocks showed little change compared with 1946. During the' past season South American wol had been cheaper than Dominion’s wool, owing to limitation in demand caused by currency difficulties.

“In attempting an estimate of the future of the market, it is a sobering reflection that in the three seasons 1945-46 to 1947-48, 21,000,000 bales of Dominion’s wool have been sold, representing 7,100,000 bales of stock wool and 13,900,000 bales of current clips,” said Mr Duncan. New Zealand stock wool held by the Joint Organisation at the end of June last amounted to approximately 800,000 bales, Mr Duncan continued, and its directors had decided, subject to alteration, that 350,000 bales of New Zealand wool should be offered during 1948-49. Of that total 150,000 bales would be offered in New Zealand and the rest in the United Kingdom.

The outstanding features in the operation of the J.O. during the 194748 season has been the continued rapid reduction in the war-time stocks and the very satisfactory prices ruling in the auction sales. With only 800,000 bales of New Zealand wool remaining in stock, the review provided for in the Marketing Plan to take place in 1950 became of major importance. , “There are signs that growers in the .three Dominions favour the establishment of a permanent marketing plan on the lines of the J.O. when the liquidation of stocks has been completed an dit may well be that in 1950 the time is appropriate for discussions regarding this post J.O. proposal,” commented Mr Duncan. In a review of the capital position as at June 30 last, Mr Duncan said that in terms of the marketing plan the New Zealand Government agreed to find, in four annual instalments, the capital represented by the halfinterest it undertook to acquire from the United Kingdom Government in the net value of the opening stocks, in the event that the New Zealand Government one half share of sales of stock wool, less expenses, was sufficient to meet these capital commitments.

The opening stocks were valued at £33,601,080 sterling, from which figure, by agreement of all parties, the war-time profits on wool sold to countries other than the United Kingdom, amounted to £6,956,370 sterling, were to be deducted. This left the net value of the opening stocks at the figure of £2'6,644,710 sterling. Thus the half interest of the New Zealand Government in the opening stocks amounted to £13,322,355 sterling, aund the four annual payments to £3,330,588 sterling. The J.O. operations had proceeded very satisfactorily,and sales of stocks had been made at a rate and at prices exceeding the expectations when the plan was launched. The position at June 30, 1948, was as follows:— (a) Stocks had been reduced by 55 per cent, from 1,777,000 bales to 800,000 bales. (b) The proceeds of sales of 977,000 bales had been sufficient to meet the organisation’s own half share of the operating expenses, to meet fully the first three of the four annual capital payments due from the New Zealand Government, and to leave only £1,124,553 sterling owing on the fourth and'final payment. Thus at June 30, 1948, the position of the New Zealand Government was that it had 7 a one half interest in the sale'value of the. remaining stocks of 800,000 bales, after allowing for the organisation’s one-half of operating expenses incurred during the period of sale. Oue of this halfinterest, the New Zealand Goveinment still had to find the balance of the final capital instalment, viz. £1,124,553 sterling, and the remainder of the proceeds would represent the New Zealand Government’s share of the final profit. The amount of this final profit would, of course, depend on the time taken for disposal of the remaining stock, and the net price received for it, after allowing for expenses. A further factor to be taken into account was the possibility that during the period of the.sole of the final stock there might be buying of wool by the J.O. at reserve prices. Dealing with the growers’ contributory charge account, Mr Duncan said that the reserve in it amounted to £2,500,000, which was invested m New Zealand Government 3 per cent, stock. .