IMPROVED WOOL PRICES

Otago Daily Times, Issue 18754, 6 January 1923, Page 10

IMPROVED WOOL PRICES

EFFECT OF FASHIONS. GROWING DEMAND FOR CROSSBREDS. Textile trade recovery. RELIEF FOR FINANCIAL STRINGENCY. (From Ode Own Correspondent.) LONDON, November 24. A useful analysis of the position regarding Australian and New Zealand wool was made by Mr A. Williamson in his address as chairman of the English, Scottish, and Australian Bank, at the meeting held at 5 Gracechnrch street on November 16. The 1921-22 wool clip totalled somewhat over 1,900,000 bales. At the time of the bank’s meeting a year ago. though a great improvement had taken place in wool prices since April, 1921, a setback was experienced in the London sales then proceeding. Hi? own view was that a genuine trade revival was behind it. and that with possibly occasional temporary reactions it was likely to be maintained, if not increased, and that probably the value of the shipments of wool for the year to June 30, 1922, would exceed the figure of £53,700,000 to June 30, 1921. The course of events since then had fully justified this forecast. 'The value of the wool shipped (including £1.200.000 of tops) amounted to nearly £48,000,000, and with certain occasional tem porary halts and ono reaction, prices had not only been maintained but actually showed an advance on (his time last voar of quite 50 per cent, on the great bulk of Australian wools. Looking back some 18 months and remembering the huge surplus of wool weighing on tho market, and viewing the present position, the improvement, was remarkable. Now there was practically no surplus of merino wool, and if the demand was maintained there would probably soon be an actual scarcity. The fashion—or passion—for fine smooth cloths has created an altogether disproportionate demand for merino as contrasted with crossbred wool, and in consequence tho surplus of crossbred was still very large. However, the present relatively high prices for fine wools was causing increased inquiry for the finer counts of crossbreds at rising prices. Indeed, this demand already showed signs of widening out to the medium qualities, and to some extent tho lower qualities too. UNSOLD STOCKS. Atrihe present time the only surplus of crossbred wool was that in the hands, or under the control, of 8.A.W.R.A., being the unsold balance of the carried-over wool under the Imperial Purchase Scheme, and tho balance of tho free crossbred wool of Australia and New Zealand (the old dips of the Argentine having been disposed of ns well as those of South Africa). The total of these unsold stocks of crossbred wool at October 31 last amounted to some 1.100.000 bales. The quantity of Australian and New Zealand/ wool that had passed the hammer during the last 12 months, about 3.700,000 bales, was astonishing, and of this enormous quantity probably 75 per cent, hod actually gone into consumption, so that the warehouses of Bradford users had only but moderate stocks, as also had those of tho French and German, buyers. The clip for the current. 1922-23 season is estimated nt about 1,900,000' bales, and in view of the steady rise in prices and the growing demand the value of the wool exports in 1922-23 would probably exceed the £48,000.000 —the value of last year’s shipments—which would be very advantageous to Australia. IMPORTANCE OF A STEADY MARKET. “Gratifying as it cannot but be to growers to get such satisfactory prices for their product as those now ruling for the finer wools,’’ said Mr Williamson, “it is not in tho beat permanent interest of the industry for- prices to go so high as to get out of reasonable proportion to the )>rice obtainable for the manufactured article, as that tends to reaction and instabilitv in prices, which is the worst thing possible for tli© trade. A steady market at reasonable nrices i« better than violent _ movements up and down. To banks issuing, credits and making advances on shipments very high nrices have obviouslv their disadvantages. While that is an incontrovertibly sound business statement, it does not necessarily mean -that present prires are too high. On the contrary, having regard toi tho statistical position. I consider that present prices fer merino are reasonable, and for crossbred low. Having regard to the world stocks of wool it will be found that a shortage of merino is in sight, and that it, will not be so very long, in all probability, before those who want, merino may have to pay a great de" l higher nrice for it than rules tb-day. While the 1.100.000 bales of surplus Australian -ipd New Zealand crossbred wool, equalling, say, 370.000. look formidable when contrasted only with the whole annual output of Australia and New Zealand wool of. sav. ■ 2.400,000 bales, equalling some 800.000. it is less than a seventh—just over 13 per cent.—of the total annuaj wool production of the world, estimated at 2.800,0001 b. The surplus of Australian. New Zealand, and River Plate wool a year ago was certainly not less than three times as great as the existing surplus above stated.” GROWING CONFIDENCE. "Tho recovery of the wool textile trade has been most striking, and there has of late been a growing feeling of confidence in the soundness of the revival, and. with the vanishing surplus of merino, users will have to take crossbred or go without wool altogether, for obviouslv there is not enough left to go round. In th<> face of this world position 1 do not see what can hinder this crossbred eumlus of 13 per cent, of ono year’s dip of all the world wool going into consumption and disappearing in a reasonable time. a.nd in a much shorter time than is likelv to daps© before the exchanges of Central Europe are stabilised and their markets opened. When this crossbred surplus has gone the way of the merino surplus the statistical position rt wool will become still stronger. While tho world demand for wool is increasing, the annual production shows no pigns of corresponding expansion: indeed, tho inJications are in the onnosite direction. The conclusion to which the facts of the world nosition of wool constrain one is. as I said before. tha f tho present prices for merino are reasonable and for crossbred low.” SUGGESTED NOTE ISSUE. With regard to the exchange stringency, for which the high wool prices have been largely responsible, Mr Williamson referred to the facilities which tho Government has granted tho banks as a recognised channel of relief at any time in similar circumstances. In addition to Australia’s increment from the excess of exports over imports (amounting to approximately £27,000,000). Mr Williamson mentioned that Australian funds in London were increased during the year by the payment through the banks hero of £10,000,000 distributed by the British Australasian Wool Kealisatiau Association in redemption of their Priority Certificates. From these two sources the depletion of the London funds of tlie Australian Trading Banks, which was caused by (he previous adverse balance of trade for the year to Juno 30. 1921, and which caused so much inconvenience in the latter part of 1920 and during 1921, has been more than made good, to the great advantage of shippers from her© to Australia. The pendulum, however, has now swung round to tho other extreme, and to-day, instead of having, as was the case before, too little money in London and

too much in Australia, there is too much in London and too little in Australia. While. exports from: this side were increasing, they were not doing so sufficiently to balance those from Australia. The situation in this respect had been very much accentuated through the rise in the price of wool, Australia's principal export. In the interval of a year the price of Australian wool had risen by quite 50 per cent, the total export last year amounted to over £48.000,000. or £15,000,000 over the previous year; such a rise increased the demand on the other ride for the financial assistance of the banks to a very unusual degree. The shipment of gold was not permitted. so that some other alternative was required to relieve the situation. In such circumstances the alternative which presented the most natural and sound method to relieve a situation which was most prejudicial to the best interests of Australia seemed to be for the Commonwealth Notes Board to issue notes to the banks in Australia against deposit by them in London of cash or its equivalent. There would be no inflation in ■ this, as such issue of notes would he .secured by cash, £ for £, on this side. This would greatly assist the free flow of the export trade of Australia, and could be made profitable to the commonwealth. A somewhat similar method of providing the necessary currency; for financing the export of the cotton crop and other C reduce from Egypt had, he understood, een in operation between the banks and the Government of Egypt for seme time, with most satisfactory results to concerned. Negotiations had been in progress between the Commonwealth Notes Board’ and the Australian trading banks with a view to providing some satisfactory means of rectifying .the present anomalous situation, and the negotiations- had resulted in an arrangement by' which facilities would be granted to the banks, but on somewhat different lines from those Mr Williamson indicated, and which he personally considered the most satisfactory as a recognised channel of relief at any time in similar circumstances.