HOLDING WOOL CLIPS.

New Zealand Herald, Volume LVII, Issue 17631, 18 November 1920, Page 7

HOLDING WOOL CLIPS.

FINANCING THE FARMER.

GOVERNMENT GUARANTEE.

POSITION STILL UNCERTAIN.

[BT TELEGRAPH. —OWN CORRESPONDENT.]

WELLINGTON. Wednesday. The decline in the price of -wool at the Christchurch sales on Monday following the unfavourable reports from London, has given many producers an added interest in the problem of ■wool finance. The farmers are being advised to hold their ■wool, but many of them cannot wait a ; year or two years for their wool money. | They must secure advances on the ba'cs j they put into the stores, and they are j waiting with some anxiety to learn what j the basis of those advances will be. From inquiries on the subject in com- j mercial and banking circles it was gath- | ered that the situation is still very un- j certain. Bankers and stock and station. j agents as well as farmers are watching • developments, and they are not prepared I yet to speak at all confidentially about ar- ! rangements that must depend upon cir- j cumstances. It is true that the Govern- I ment has taken power to guarantee ad- j vances made by the banks to producers, | but the terms of this guarantee have not | been defined. The clause of the Finance Act dealing • with the subject reads as follows:—j " Where any Dank carrying on business | in New Zealand has, with the approval j of and subject to the conditions imposed I by the Minister tor Finance, advanced any j moneys to persons engaged in New Zea- I land in the production of wool, meat, dairy produce, or other primary products on i the security of such products the Minister lor Finance may, from time to time, enter into agieements with such bank to guarantee to the bank the repayments of such j advances and of the interests and other charges in respect thereof.'" The Actual Market Value.

The Minister for Finance (Mr. Massey) has stated definitely that while the Government is prepared to support the producers it is not going to risk the loss of any of the public money. The banks, with or without the guarantee, will nut make advances beyond a maximum believed by them to be well within the actual market value of the wool. The question to be determined then is : What is the actual market value, having regard to all the factors? It is obvious, of course, that the company or bank making the advance will be guided also by the general financial status of the borrower. One farmer may be in a position to secure better terms than his neighbour can obtain. The man with the heavy mortgage and the small equity will be in a disadvantageous position, and at the same time he will be the man least able to hold his own wool for any length of time without assistance. If the Government guarantee is required it will be chiefly for this class of producer.

The Key to the Situation. . The conditions of the Government guarantee will not be defined until the needs of the situation become more certain than they . are at the present time. Neither the November London sales nor this week's Christchurch sale can be regarded as having fixed wool values. The real key to the 1 situation.is held by the British Government, which owns the accumulated stocks of Australian and New Zealand wool; amounting at the end of September to some 2,635,000 bales. The Government has asked the director-general o£ raw materials to continue the policy of holding wool firmly and releasing sucn quantities as can be absorbed bv the market without causing a ruinous {all in E rices. If the accumulated wool is witheld in this fashion, and if facilities are provided for getting some part of the new clip on to the market the men who have the handling -of the wool at this end are disposed to believe that any really serious trouble can be averted.

Unloading Surplus Stocks. It was suggested that the Imperial authorities owed the New Zealand producers some consideration, since the situation that has arisen is due largely to the policy followed in London during the war of selling limited' quantities' of wool at very high prices and allowing stocks to accumulate. The same policy was adopted in regard to meat, with consequences well known to the New Zealand fanners. If the' accumulated wool should now be placed upon the market quickly a most serious situation undoubtedly would be created. The Government will try to get definite assurance on this point before declaring the extent .to which the guarantee will be carried out. The policy of the banks in the meantime must be guided by circumstances. .