THE WOOL TRADE.

Manawatu Standard, Volume XLV, Issue 284, 4 November 1925, Page 13

THE WOOL TRADE.

PAST SEASON REMARKABLE. - V

SWING OF THE PBICE PENDULUM.

“The past wool season will be remembered with feelings of gratification by that section of the wool-growing community which was fortunate enough to share in the high priced period which covered the .months of September to December inclusive, and with feelings of disappointment by those whose turn for the realisation of their produce was not reached until the backward swing of the pendulum had taken place, says Dalgety's Annual Wool Review for 1924-25.

ORGY OF OVERSEAS BUYING

Never, it may he said with confidence, lias there been such a remarkable selling season as that of 1924-25, continues the review. At a time when the Dominion was beginning to emerge from the financial chaos of the slump, when the. sheepfarmer in particular was struggling to recoup his losses of the lean years which featured tho world-wide depression, there burst upon New Zealand such an orgy of overseas buying as had never before been known in the history of tho trade. It was more than timely—it meant economic salvation to great numbers —and even if this season the sheepfarmer is faced with the probability of getting about half last year’s figure for bis clip, his financial stability should in the. majority of cases enable him without, effort to put. aside tho rose-col-oured spectacles which ho assumed last summer.

All previous records were broken, and the remarkable feature of tho position, states the publication referred to, was the general confidence in the position, despite the fact that prices were admittedly on a dangerous level. Owners who sold in October and November were delighted with their returns, but the return swing of the pendulum came without warning. "With as little reason as that which attended the meteoric rise, the balloon began to sag, and receding prices quickly undermined confidence until a point was reached when the demand was insufficient to continue sales at their normal point. After suspension, business was resumed with a- 50 per cent reduction in offerings. Prices dropped 25 to 30 per cent below the pinnacle point, hut it was the lack of vitality in the demand, even more than the drop in value, which proved a bar to business. Eventually sales wore suspended. and the carry over of about a quarter of the clip was arranged for. It was an exception that last season the later shorn '■•lips secured the least satisfactory returns, for ordinarily the reverse was the case. WHAT CREATED THE BOOM. To some extent, states the review, the keenness of buying in the early part of last season was due to rather exaggerated ideas of a world’s wool shortage, and an under-estimation of the strength of wool-users’ resistance to high prices with tho aid of the new substitute —artificial silk —and other similar aids to manufacturers. For some seasons pest it had been predicted that sooner or later wool prices would touch a level which would curtail consumption, and it was surprising to many that the reaction was so long in coming. When confidence was disturbed buyers were faced with heavy stocks of wool bought at boom prices, and that was a complete answer to the suggestion in some quarters that the coilapse of the market was due to a “hear” movement. Proceeding to deal with the position of the speculator, the review states that ho lost heavily, and that it was fortunate for him in many cases that his offers were refused. In the long run the grower selling in tho auction market had the best returns and, although in the coming year many growers may ho inclined to sell privately, the position will be sharply reversed in the succeeding season, and that hasty selling bet ore the trade recovers may play into the hands of the speculating dealer and enable him to recoup his losses. A BLESSING IN DISGUISE. Among consumers of wool there are those who, taking their losses philosophically, express the view that the decline in wool values from the pinnacle I

reached in the first half of last season may, in the long run, be a good tiling from the point of view of consumption. They hold the view that tho merino end of the trade was being carried on at a level of prices tar too high for stocks to move freely into the hands of users. The price of raw material dominated the position, and the big advance in the production of artificial silk was undoubtedly duo to tho high level of wool values. Although the decline in wool values from the November peak was a sharp one, the lower range of values is still

sucii mat, by no process of imagination, can it be regarded as an unprofitable one.. The review proceeds to deal with the call for fine wools by Continental users —a matter all the more deserving of attention while Yorkshire, which accepted the broader fibre, was in a disorganised condition.

Tile future held a silver lining in that the decline in 'values must result in a keener demand when conditions became more stabilised, and there would bo the less chance of a sensational fall. It was a well-known fact that there were no excessive stocks of wool in consuming centres, for it had been too dear for manufacturing interests to stock up as in pre-war days. From reliable sources it was ascertained that U.S.A. stocks in bond were remarkably light and, generally, all indications" pointed to operations upon a substantial scale when confidence was once more fully restored. It was fortunate, indeed, that the bulk of the New Zealand crossbreds were sold off before the lowest point was reached, so that there was no rear of a heavy carry-over of New Zealand wools to embarrass the position. WOOL SUBSTITUTES. The review proceeds to deal with the general under-estimation of the important bearing on the industry of wool substitutes, notably artificial silk from wood pulp, and emphasises the fact that any attempt to force the level of the market higher only serves to stimulate industries dealing with wool substitutes which, in fact, depended not so much on their own merit as on the wool market. 'The world still required all tho wool that could be produced, but it must be able to secure the raw material at a price which would allow of a reasonable margin to tile user. Of late years that margin had not been possible. There was a mistaken idea that artificial silk was not a competitor with wool, but with cotton. As a matter of fact its most remarkable development had been in the hosiery trade, but worsted manufacturers had recently awakened to the fact that the new substitute had great possibilities for them. Wliile recognising the value of statistics bearing on the industry, the review points out their limitations and the impossibility of making accurate forecasts upon that basis. Mention is also made of the textile industry in England with its unemployment anil general lassitude owing to the uncertainty of the wool market. PROSPECTS' FOR WOOL. Dealing with the prospects of wool, the review states: “The problems which face the wool trade to-day render it more than usually difficult to forecast the future of wool values, but the progress of the patient must always depend in a large measure upon the ability of his medical advisers and the efficacy of the prescription, and so long as there is uncertainty as to tho methods to be adopted to restore confidence there can he no estimate of the length of the period of convalescence. Artificial and theoretical aids to stabilisation may hamper rather than expedite progress,

but presuming that nothing is done to usurp the functions of trade control in Australia, there is reason for anticipating a strong demand for wool. Past experience has shown under similar circumstances that confidence is tho more readily established by free, as distinct from panic selling. Wool is somewhere near a basis at which it can lie produced and handled profitably, and once that* fact is generally recognised sound progress is not only possible, but highly probable. The deflation of wool vaiues has been necessary for a long time to encourage a fuller and freer consumption, but the sudden deflation lias caused heavy losses from which recovery can only be gradual, and until jt is complete future operations must necessarily be crippled. There is certainly no justification for undue pessimism or any call for panic legislation. The trade is certainly passing through a period of crisis, but there are indications that recovery of confidence under normal conditions of selling will not be long in coming, and that when it docs arrive here there will be a very material expansion of business. Visible supplies of wool are swollen by a carryover of approximately half a million bales of old clip in Australia, and as a result of a splendid season a still further increased clip is awaiting the, shearers. These facts will, however, encourage rather than discourage buy-’ ers because, whilst they majee adequate supplies a certainty, they remove the danger of any recurrence of boom values dictated by any fears of a woo! famine. When we remember that in recent years tile wool trade" has absorbed a heavy supply of Ba'wra wools, in addition to current production, the market does not appear overloaded today. Further, we have the essential fact that there are no excessive .inklings of wool in nanuinctiif'iig countries. Given normal and rational control there are sound reasons for anticipating a return of confidence anti an increased turnover, and whilst recovery may be more rapid in the case of fine wools, it must before long spread to every description ol the staple. In this connection it lias to be borne in mind that the coming clip, grown un-

der generous climatic conditions, may accentuate that broadness of staple which so affected sales in the past season. With, however, a recovery in Yorkshire trade, the demand for these sorts should materially improve, especially with the price level on a safer basis. All things considered, there is reason to look for a period of cautious buying leading to a gradual extension of business and culminating in a successful season. Unforeseen circumstances may, of course, arise to delay matters, but taking the indications today encourages tho belief that the period of crisis will pass, and a recovery of tlie world-wide demand will speedily dissipate the clouds which hang over the wool trade at the moment of writing. THE CARRY-OVER. “The carry-over of Australian wool to tho now season, approximately half a million bales, represents about 24 per ceiit of the receipts into store. Tho volume is certainly substantial, hut from a trade point of view does not cause any undue alarm. The London Economist, referring to this icature ill a recent issue, said: ‘lf immediately following the war period the trade could absorb nearly 3,000.000 bales of old Bawra wools, in addition to the current elips, whatever weight of wool now needs to he carried forward to better days need cause no undue concern. Immediately confidence is .e----stored the trade will be roly to buy all the available material.’ ”