THE WOOL MARKET

Otago Daily Times, Issue 23354, 20 November 1937, Page 3

THE WOOL MARKET

JAPAN AND AMERICA IMPORTANT FACTORS AT AUCTIONS POSSIBILITIES OF GOOD DEMAND With the better classes of wool coming on to the Australian market under the zone system of selling, there is a definite upward trend in prices. Even with Japan still buying very little, the demand is keen, and the whole position of the staple thoroughly sound. Whether Japan intends to come in largely or to spread only a limited demand well over the wool season is still a much-debated point, although indications have not been lacking of Japanese interest in the New Zealand sales, which open this month. No doubt our Eastern customers know fairly accurately where they stand to-day, but they are not likely to make any definite statement of their intentions, realising that the more uncertain the position is the less likely is the market to rise against them. There was a time when they bought with the utmost freedom, and did not seem to worry how far their competitors forced them; indeed, they even competed against each other in a way that was most surprising to more conservative—or more experiencedbuyers. Now their limits are severely restricted, and it can be taken in a general way that the main reason is the need for all the money they can save to finance their military campaign against China. The partial boycott of their goods in other countries is apparently making iteelf felt, and, as. was to be expected, they are threatening retaliation. It is quite impossible to estimate the extent of an individual boycott of this description, but what is probably hurting the Japanese at the moment is that traders in this and other countries are uncertain how far the boycott will go, and are protecting themselves by cutting down on orders for the Christmas trade. Having concentrated on production for that special trade for many months, it stands to reason that Japan will be hard hit if the orders are cancelled and new ones almost impossible to secure.

A member of the Japanese Chamber of Commerce in Sydney stated recently that if the boycott in Australia extended his Government would have to consider taking action to meet it, and he mentioned as a possible move the restriction of purchases of merino wool. “Japan,” he said, “could do with far less wool (for home consumption), especially in view of the rapid development of staple fibre.” Obviously, growers can exert no control over the individual trading of the general public, but also obvious is the fact that the world wants all the fine wools that are produced, and if Japan does not buy it others will, although the elimination or restriction of any competition must naturally affect prices. The introduction-of the zone system for 1937 brings forward the possibilities of the United States demand (says the Sydney Mail). What wool has been taken by that country so far has been restricted to the best descriptions, of which not very much has been available.

The natural question is whether the United States will take as much wool this season as last, and that is a most difficult question to approach. So far, they have bought more, but that can hardly be taken as any indication since, if shipments to the United States for the balance of the season are to be in the proportion shown by the shipments of the first three months, the United States will take some 700,000 bales of Australian wool alone, and hardly anyone in the trade is willing to be as optimistic as that! Thus, it is quite plain that the early figures are of little use as a basis of comparison although they do indicate that we can expect a strong demand. After a leap from 87.000 to 277,000 bales, one expects to see what might well be termed “a return to normal.” The trouble is that no one knows what “ normal ” is when speaking of the United States demand. Perhaps it would be safest to suggest something between the figures of the last two seasons. Everything depends on the stock position in the United States, and that is something of which only very meagre figures are available. That it cannot be very high is suggested by the fact that a duty of up to 34 cents a pound has had to be paid (on present parity) on all the wool purchased in Australia and New Zealand last season as it went into the United States. If stocks were heavy, or were increasing steadily above a point absolutely essential, holders were hardly likely to take any more wool than they needed. There is a possibility here, however, that has been much discussed, especially overseas, and that is that a fair weight of the United States purchases of wool may be held in bond, and later shipped to London for re-sale. This has been done on previous occasions, but even were it to be indulged in at the present time there would be little to fear, since the wools would all be of the better descriptions, for which there is a firm inquiry. Incidentally, such sales, if of wool bought at the peak of last season, would not show much in the way of profit to the buyer after allowing for the costs incurred since their purchase.

For the first three months ol the season the United Slates bought 8563 bales in Sydney, as compared with 3380 bales in the corresponding period of last season. That total is only a very small proportion of the wool bought on that account during the 193637 season (277,351 bales). This was a remarkable, and incidentally a record, total, exceeding (he previous season’s figures by 190,000 bales, and being about 13 times the total of the season befoi'e that. The increased demand from America however, was by no means confined to Australia, the South American and New Zealand clips also finding good buyers in the United States operators. The following figures covering the past, decade’s business with Australia and New Zealand are illuminating:—

These figures are illuminating from more than one point of view. First of all they show that, although the United States demand can be classed as spasmodic —and further reaching back would show this more plainly—it is a demand that holds for a while when it does develop. It is also noticeable that there has been an increase year by year as the depression times are left behind.

In South America the United Stales proved to be the biggest buyer of the selling period corresponding with our season. Up to a few seasons back she held the position of fourth buyer there, but since 1934-35 has steadily improved. Between October, 1936, and March, 1937, she secured some 87,000 bales of Argentine and Uruguayan wool. Added to her other purchases, this makes a very substantial amount of wool to import oyer a very high tariff wall, and it is quite obvious that there must have been strong impelling forces behind the purchasing campaign.

CommonNew wealth. Zealand. Total. Season Bales. Bales. Bales. 1936-37 .. 277,351 114,513 391,864 1935-36 .. 87,022 06,082 153,104 1934-35 .. 21,045 22.049 43,094 1933-34 .. 15,711 15.842 31.553 1932-33 .. 22,311 12,775 35,086 1931-32 26.030 6,271 32,301 1930-31 .. 67,004 14,086 81,090 1929-30 .. 58,819 17,589 76,408 1928-29 .. 71,327 34,360 105,637 1927-28 .. 75.929 27,666 103,595