The Collapse in Colonial Wool.

Otago Witness, Issue 1805, 25 June 1886, Page 7

The Collapse in Colonial Wool.

In the face of the recent rise in the price realised for wool in the Home market the fullowiug article under the above captiou in a recent number of the Statish cannot fail to be of interest : —

Now that a new series of wool sales are close at hand it may be of interest to give a glance at the position. 'Che last series of colonial wool sales is understood to , have beou the moi>t unsatisfactory ever known iv the history of the trade. It not oniy disappointed the sanguine expectations that wore entertained of a recovery from the very low level of prices which ruled lasL year, but it developed a furiher decline. x\s often happens in such cases, there wits a blight rally at the end, but i\, did very liUle towaid counteracting the original loss. When buyers thought that the prices had touched what the Americans call "bard pan," they came iv more freely, stithout, however, producing anything like active competition. The-.o Milt* leave the wool market iv a very weak and demoralised condition. While this brokers in Oolewan-street were, .struggling in vain to get rid of tho last of tiie old wool, the sheep f arniers in A ustralia and at tho (Jape were busy shearing the new clip. Already thousands of bales of it are on the way homo hs fast as steam can carry them, agaiust miii'h of which, it is no secret, money has been advanced before the previous clip had even been removed. Thu new season has, in fact, begun before the trade was ready for it, and begun badly.

Would that we could hope it had already matki'n the, lowest ebb in the fortunes of the wool grower. With this examples of silver aud copper before us, it would seem almost hn-|i(.ia.-ibk; to Iks too pessimist. Mtill, when we read in broke)-.' reports ot greAS3 wool belling at (id, sil, H, 3.]_ cl, and even as low as 2d Jper pound, we may console ourselves that there is no l - lu'ii'ii room left for lower depttm. Auv imftirtnuHli'. "lo"-ks and pieces" that hiivt '" > In l.i> knocked down at 2d will barely pay iisd <-<n riage, freight, aud commission. The grower.--would have saved money by burning or burying it when they took it off the sheep's back. These exceptionally poor prices are the saddest feature of 'tho sales. Aey recall the story of a great catastrophe, which at the time excited very little attention in this country, and has passed long ago out of public memory. Yet the three years' drought was for Australia a disaster quite as great, it' not greater, than the worst "outbreak of rinderpest would be, to our own herds. In New South Wale.s and Queensland millions of sheep died of thiist and hunger. Flocks had to be driven hither and thither in search of water or wherever they could get a bite of grass to save their lives. Large areas of country had to be deserted, because stores could not be sent up to them or their wool taken away. Many t-'quatters lost a third or even half of their sheep, and on a flock of 60,000 or 80,000 that would bo no trifling reduction. One of the great pavfcoral companies which ha\ c their headquarters in this country estimated its losseb during the drought at from 60,000 to 70,000 head. It has been publicly said in New South Wales that ten millions sterling would hardly cover the damage caused by the drought in that colony alone. So gigantic a calamity could not fail to have a disturbing effect on the -wool market. Very little foresight seemed necessary to anticipate from it certain consequences. Both in Ooleman street and at the Antipodes there was only one opinion, that the succeeding year's crop must be greatly reduced in quantity, iujured in. quality, and enhanced in pric«. Rut only one of these three anticipations has proved correct. The quality of the clip has greatly deteriorated, but the total supply was not curtailed, and the price instead of advancing has receded to abont the lowest historical point. Not only have the faulty wools which sutt'ered from the drought had to undergo as it were a forced hale resulting in the absurd quotations we have mentioned above, but they seemed to have dragged down the good wools along with them. At tho worst period of the November sales the latter were proportionately weakest. At ono time scoured wool was down 2d per lb, and washed fleece lid to 2d below the rates of June ,July, while good merino in the grease foil only 1 d to IM per lb, and erosabreds have had a merely

nominal decliue. All violent movements in the colonial wool market have the same iwegulaT character, some classes being severely atfecttdj and others very slightly. The caprices of the trade are so sudden and unaccountable that the most experienced broker would be chary of venturing an opinion on them. No two series of sales ari' held under the same conditions. The wools offered may differ, or there may be a Change in thu class run on. The buyers themselves are subject to very marked transformations. In one series iTorkshiremen may pre» dominate } iv another the most active competition may be Fraich or German ; and in a third the sustaining power may be American. But for American bujingthe past series, bad as it was, might have been considerably worse. The only wools which maintained their value were tho better kinds of Victorian aud New Zealand grease suitable for the transatlantic market. Those which declined most heavily were what should have gone to the Continent, had Continental buyers been present to bid for them. As a rule, however, the bidding svas left very much to the home tra.de, and wools which it did not happen to want at the moment have either gone at very low rates or been bought in. When the squatters' make up their accounts for 1885 there will be, a great diversity of luck among them. Those who were able to send home a sound wool, and to get it entered at a favourable may not be very much worse oft than usual. Others who had sent a poor article to market, and of a kind not in present demand, must have received disheartening returns.

In the best of years wool is a curious lottery. Its sale <loc!S not admit of the simple and comprehensive methods of tho cotton trade. It cannot be clris^ifted into six or seven grades aud hundreds of bales sold from the same sample. Every sheep run has its own brand, aud from from one run half a dozen different consignments of wool may be shipped. One auction catalogue m,iy contain two or three hundred lots ranging from a few bales up to sixty or eighty, or oven more. Befow the sale every lot will have beeu opuii for inspection at one of the huge warehouse in blit- City or at tho docks. Every intending buyer will have carefully sampled the lots he meant to bid for. ftome will have been pitched on by halt'-a-'Jozen buyers, while others will have, received no attention. The effects of the morning inspection '.how themselves unmistakably in the auction room. One lot may be read off in silence, and vox, evoke a single bid until the broker drop& his price low enough to temjjt a b&rgain-himtijt 1 . Then, before he has time to call out the n<'xt ohere may be half-a-dozen men on their fee.t yelling at him and shaking their fisis, and otherwise acting demoniacally. He is Sdved the trouble of bidding down to them, and generally succeeds in getting them to run each other throe or four points up from where he started them. The wool thus lustily competed for may not be in all cases a better artic c than that which did not draw a bid. It only happens to have suited the needs or the taste of a number of buyers, all of whom think it may be tho best thing they will be able to get. The hot and cold fits follow ouch other rapidly through page after page of long catalogues, and at the end of the series it will probably be found that over 300,000 bales, with a money value of £4,500,000 sterling, have run the gauntlet, or, in broker's parlance, " passed the hammer." In the series just closed ouly 224,000 bales were catalogued, aud 202,000 bales sold, but the new wool does not come forward freely till March. In the November series there were 340,000 bales available, of which, however, about 70,000 bales were brought over from the preceding sales. The total quantity catologued was 302,000 bales, and deducting about 30,000 bales brought in, the quantity sold would be 268,000 bales. The JuneJuly series was even heavier, 352,000 bales having come forward, and 323,000 bales having been catalogued.

These- wide variations in the supply at each series ari.->e partly from the fluctuating arrivals of fchts wool, and partly from the regulating authority of thu Importers' Committee, who determine beforehand the quantities that are to be entered at each sale. The whole business is governed by very strict and sometimes arbitrarylooking rules, which to a stranger might seem survivals of the Trading Guilds of the Middle Ages, though not one of them, in fact, may date back more than a quarter of a century. They are generally observed as scrupulously as if they had descended from the Flemish wool-staplers in the days of the Plantagenets ; but there are exceptions, and one or two of these have considerably agitated the trade during the current year. Originally a veto was put on offering any lot twice in the same series of sales; when bought in it had to be held over till the succeeding series. Of late " buying in " has very greatly increased, and strong complaints against the hardship of being kept out of the market for weeks or it might bo months have caused the old rule to be relaxed. Complaints are arising new on the othor side that persons who wish tD •t 11, and probably must sell, are prejudiced by this loose practice of buying-iu and re-cata-loguing. It is argued that buyers get demoralised by it, the apparent supply being artificially increased, and competition proportionately weakened. A bigger question, however, may lie at the root of such controversies. The quantity of wool to be handled may be growing too large for methods which served their purpose admirably ten or fifteen years ago. They were framed for a trade not a third or a fourth of the size that, it is now. Regulating supply is fascinating in theory, but, it becomes difficult in practice when the subject to be regulated bulks up to eighteen of twenty millions sterling per annum, and is thrown on the market in masses of four or five millions sterling at a time. Apropos of valuation, the Board of Trade authorites do not appear to have been taking much uotice of the great decline in wool. The imports from Australia are sfcill officially assessed at about Is per lb over bean. The prices now being actually realised will probably not average within 2d or 3d lb of the official standard ; and if so, our imports of Australian wool are being over valued to the exteut of three or four millions sterling per annum. Mr Giffen is, we believe,, very ready to receive suggestions for tbe improvement of his invaluable statistics. Here is one for him which might be carried out with very little trouble and with good results. It would be quite possible to obtain from the wool brokers at the cloab of each series of sales a statement of the actual proceeds,and theft ve series added together would show to a few thousand pounds the true value of the year's imports. Account would have, of course, to bu taken of the increasing quantities sold privately or going direct to the manufacturer.

There, is at present a wide spread and a very justifiable demand for more scientific statistics in regard to trade of all kinds, especially domestic. The colonial wool trade offers itself more readily than any other to exact statistical treatment. It represents au enormous volume of produce flowing through one channel to a cosmopolitan centre. At least ninety out of every hundred bales of wool grown in Australia, or at the Cape, are shipped direct to London. There they are sold in a single room no larger than a vestry hall. After sale {Ivy start ogam on their travels and are distributed to all

parts of the world. Very frequently more than half the contents of a series go to the Continent, And for certain classes of wool America is a. steady bXiyer. In this way over a million balev averaging? 4001bs a-piece f are every year distributed from the grower to the manufacturer, \ji\H3\i\g through tho hands of- the smallest possible muSber of middlemen. The financial machinery by ttT-^GS of which they are shipped, sold, and reshipptu v> the consumer,, and paid for in Australia is of the simplest a % d mOBt business-like kind. B^ery modern improvement of steam, telegraphy, and banking: is utilised in it for economising tiiue_ and expense. It deserves the special attention of Mr Goschen in this respect, that it is a great staple trade practically independent of currency. He might find it interest my to apply his " appreciation of gold " theory to a course of " exchanges in which gold counts almost for nothing. It would tax even his powers of investigation to discover evidence of a single sovereign having ever been sent to Australia iv payment of wool. In ordinary practice the exchange is effected without the help of an ounce of the precious metala. Before the wool^ is shipped from Australia the grower obtains from his banker or financial agent an advance on it with the customary margin. The bank or Financial Company haa it consigned to its own agents in London, who settle for freight and charges, employ the broker, and receive from him the proceeds. The account sales are then returned to Australia, and the final settlement is made there between the grower and the banker. Aa between England and Australia, the real payment is made in merchandise, which the latter buys from us.