THE WOOL SITUATION.

New Zealand Herald, Volume LVIII, Issue 17802, 8 June 1921, Page 8

THE WOOL SITUATION.

CAUSE OF ACCUMULATIONS.

HOME GOVERNMENT'S CASE.

" UNAVOIDABLE CIRCUMSTANCES." PRESENT POSITION REVIEWED. [BY TELEGRAPH. —OWN CORRESPONDENT.] WELLINGTON, Tuesday. The handling of Nevj- Zealand wool by th« British Department of Munitions during the war years has been the subject ot a great deal of adverse criticism. The department accumulated the enormous surplus of colonial wool that has threatened to cause the complete collapse of the market during recent months, and wellinformed critics, including Sir Thomas Mackenzie, have stated that the department maintained high prices and restricted consumption in the face of definite warnings as to the consequences of its policy. Sir Arthur Goldfinch, who is now London director of the British-Australian Wool Realisation Association, was the DirectorGeneral 'of Raw Materials under the Ministry of Munitions, and his side of the < ase has been presented in reports to the Imperial Government. The reports throw some interesting light upon the wool problem.

The requisition of wool grown within t.Lo Empire was forced upon the Ministry of Munitions by the conditipns of the war. The effective regulation of supplies was a mattor cf life and death for the nation, which conld not permit the amount and character of available supplies to depend upon the judgment of individual importers. The ordinary laws of supply and demand had ceased to control prices, and it had become necessary to require that shipping should bo concentrated on the moving of essential goods. It was in these circumstances that the contracts for the purchase of colonial wool were made. " Tfifro can bo no question,"states a report,' " that three successive contracts with Australia and New Zealand were wise and statesmanlike measures at the time they were made, and have worked out (until the end of 1920) to the advantage of all the contracting parties. It w<js an immense advantage to the sheepfarmers of both Dominions to have secured for them the purchase of all the wool as soon as it was shown at a schedule of prices fixed on a remunerative basis. They were thns relieved from all the anxieties connected with the war situation and with the critical condition of ocean traffic. Great accumulations of wool took place owing to the difficulty of providing sufficient steam tonnage during the submarine campaign, and the course of prices when the war should end was unknown. Great Britain, on her part, received compensating advantages. 'Die control of a sufficient quantity of wool suitable for military purposes was essential for the efficiency and security of the supply departments, and it is admittedly the case that from 1917 onward wool could not have been secured from foreign sources so cheaply as it was secured by the requisition of the British clips and the purchase by contract of Australian and New Zealand clips." Accumulations in 1919. The report refers to the fact that during the years 1917 and 1918 there was "chronic scarcity of wool, ,T not only in Britain, but also in France and Italy. The depart ment had to see that supplies were availably for the present and future needs of the British and Allied armies, and it adopted an elaborate system of rationing. Stocks of wool accumulated during this period, but chiefly overseas. A. balancesheet, prepared on March 31, 1919, gave the following details: — . Stocks of wool and sheepskins remaining | in the colonies or, afloat, valued at f.o.b. j cost: Australia, £43,083,119; New Zea-! land, £20,508,984; South Africa, £118,784; and Falkland Islands, £121,078; total, £63,831,965. I Stocks of wool, tops, noils, waste, sheep- j Bkins, etc., in" England, valued at estimated cost £23,013,016. The department at that time had large stocks of wool, 'but nearly throe-fouirths of the actual material was overseas. The war had not ended until November, 1918, i and up to that time the department hud felt it necessary to maintain adequate reserve stocks on the United Kingdom as provision for army requirementß. Provision lor Maritime Losses. '

"During the three years of Government control, from 1916 to.March 31, 1919," ' proceeds the report, "the selling prices of -wool within the British Dominions were kept on an almost ■'uniform, level, and; for' the greater part of that period were con- . riderably lower than in any other part of the world. In fixing these prices no attempt was made to secure more than a moderate margin of profit over and abov« the requisition or contract cost cf the wool, with a proper allowance for charges and contingencies. The purchases of Australian and New Zealand wool, having regard to thc> greatly increased transport charges, resulted throughout in a higher , proportionate cost than that of the Home wool, and as Homo and colonial wool are ' to a great extent interchangeable in ufe, it was necessary to fix the prices on the basis of a/iair margin over the cost of the' colonial wool, thus leaving a considerable margin over the cost of the Home-grown wool. lei the case of colonial wool provision had to be made for maritime losses, which at the height of the submarine campaign were almost incalculable in extent, and when regard ia had to this and other important elements of risk due to the abnormal conditions of the - it must be recognised that selling prices were fixed on, a reasonably low level throughout the period of control. "When hostilities came to an end in

November, 1918, orders for military equipment were suspended as rapidly as possible, and every preparation was made for a speedy return to peace conditions. Pressure was brought to bear on the Ministry of Shipping to secure the carriage at the earliest possible moment "of such quantities of Australian and New Zealand wool as should bring up stocks ins Europe toa comfortable level. The department had to look forwarl for a period , of two years or more to biing the solo purveyor of Australian and Now Zealand wool, and a special responsibility was felt tor the requirements of France. Belgium, and Italy, and more particularly of the two former countries, whoso wool industries had beera temporarily destroyed by German invasion. It was necessarily a ' matter of great difficulty to forecast, the rate of restoration of the French and Belgian manufacturing industries, and tho responsibility was case upon this department of-building up a stock of wool in England sufficient for the requirements of rur Allies as well as tlmse of our cwn industries." ' Abolition o! Gont;oi. The report points out that the Imperial Government did not purchase the British 1919 wool clip, and hat it abolished official control of wool, until in January IU2O, "nothing remained of Government control of wool except in connection with the Imperial purchase contracts of Australian, New Zealand, and South African wool." The 'Ministry of Munitions contends that after April, 1919, it did not rtstnet the supp.y of wool to the market Auctions were tho chief channel of distribution tor New Zealand and Australian wool, but it was agreed that the system of issue at fixed prices should be continued until November, 191.9, in respect of a moderate quantity of wool to be distributed to manufacturers and spinners in Britain and to the Governments of France, Italy, and Belgium. The issue price was fixed at & P «T lower than the prices ruling for the preceding 12 months. Auction prices for fine wools soared high while tne distribution of this issue of wool was still proceeding. Th e Ministry argues ttii«.rt t 2 bßXin ß B <* em es were essenbviJTr- of * he . contacts, it would have been failmg n its duty to the colonial ¥* n^ected *<> take the best, price offered at auction. It denies

that the markets were starved of wool in i 1919 and 1920, and evidently believes that j the present situation ought to be regarded as the result of circumstances quite beyond the control of the department. A memorandum issued by the Ministry of Munitions within recent months surveys the situation as it exists in 1921. "By far the most important problem at present in the raw material section of the Ministry is the stock of colonial wool bought in pursuance of war contracts and remaining in hand," it states. "This at cost price at March 31, 1920, amounted to £73,483,789, while to-day the stock remaining approximates some £60,000,000, comprising about 2,500,000 bales of Australian and New Zealand wool, about half of which is in this country and in transit, and the other half in Australia and New Zealand." (This is the wool that has been transferred to the British-Australian Wool Realisation Association for realisation). "The elimination of the Central Powers during the war and largely since the armistice as purchasers of imported wool has naturally increased the difficulties of the situation. ■•' Belgium and France have to some extent been purchasing British Government wool, both in Antwerp and in London, but owing to exchange difficulties they are purchasing as little as possible. Germany has made no direct purchase, nor has Austria; but arrangements have lately been made to supply Austria with £800,000 worth of wool, and negotiations are going 0 n in respect of supplies to Poland. . . There are large stocks of low crossbred wools in South America which are being offered to the Central Powers at very low prices. The fall in prices in the United States and South Africa has also been very marked. It will be seen from the foregoing, therefore, that the present position of the wool trade is extremely difficult. To attempt a forced realisation of £60,000,000 worth of wool at an early date is, in the first place, impracticable, and, in the second place, it would ruin the entire woollen trade of this country if attempted, quite apart from the fact that Australia and New Zealand are financially interested in the profits realised on the sale of the Government stocks of wool."