THE WOOL SITUATION.

Otago Witness, Issue 2425, 5 September 1900, Page 15

THE WOOL SITUATION.

By T. O. Price.

The heavy decline which attended the opening of the July series of wool auction sales in London is a very serious matter, and though the cciirse of value showed a considerable irregularity in respect to the different classes of wools, it may be noted with some degree of satisfaction that some improvement was realised as the" sales progressed, and values closed at a higher level than at the opening of the series. The change that has come over the wool situation in recent months will be easily' perceived if we state that aince December last prices for merinos, and fine crossbreds Lave declined from 27& per cent, to 30 per cent..,, and for medium and coarse crossbreds 20 per cent. — ■ repiesenting a difference in value in the case of the former of JCS per bale, and in that of the latter £S per bale. Jt may be interesting at this juncture to fe«

view the events which brought about the severe crisis through which the woollen industry is , passing, for it is not possible to say that the , danger is past. "Without a doubt, the more im- ' pcrtant factors in the trouble have been colonial purchases, and an inability toY cope 'with 'the , heavy financial responsibility attaching to' them - owing to a- difficult money market. The Con- , tin ent may be said to be suffering acutely from ' this condition of affairs, a strong evidence of which is contained in the reported failures in France, where three big wool firais at Turi coing have suspended payment with liabilities . amounting to 12,000,000 francs. Then, too, the heavy arrivals in London during the first three months of the year are gradually becoming a I serious factor. The first two series of sales (the most important of -the yeai. as regard selection) are held when colonial purchases ' have to be financed, and this fact was chiefly responsible for the decline which took place at i the March sales. In addition to these factors •"the demand for the United Slates of America has been intermittent all through, the'repre- j scntative buyers having been extremely re- ' served in Iheir operations. But other and stranger features have marked the course of the wool trade during the past ■ few months, which are not likely to be for- i gotten for some time to come. For the first | time in- the history of the present generation of wool men we have been brought face to lace with a deliberate attempt to form a " corner ' in wool, and, as >Tas to tSe expected, the result 1 has been disastrous to all concerned. The i London Colonial Woolbrokers' Association is responsible for this, notwithstanding the fact that, those firms comprising the association who are engaged in the business of handling colonial wools have hitherto prided themselves upon being very much up-to-date. It is .well known that any attempt to " corner ", a, pro- j duct of such volume can have but one result — namely, that of great disaster, attended oftentimes by the ruin of both fortune and reputation. Briefly, the position was as follows^ — •At 'the closing of the May sales, the London selling^bjfpkers founds themselves in the ppsi-.. tion of/ Jttaving .sold 13J,0'00,bale^, and .having - 'held o'tfe'r"" 165,000 bale's) a 'most 'extraordinary showing.. It 'necessary theref ore ■to - , carry over this endrmoits quantity of- wool to i th.3 following series fixed for July (the .total number of bales carried over from 'the corresponding series of the previous, year ; was 5000 bales, so it will be seen by the-un-. initiated wliat' ■ a very unusual, and, to some extent, unexpected situation had been evolved by this action on the part of the selling firms). Yet the demand was good, and the strength of it was indicated by the firmness of the prices then established, and it is not too much to say that the great bulk of the wools offered coiild have been sold at a price. This, however, did not suit the sellers, who resolutely refused to face the position, and the consequence was the policy of withdrawing the wool was resorted to, with the result of staving off the evil day for a matter of two months. The restilt of resorting to such methods can be seen by the heavy decline which marked the opening of ! the July series in London, thus prolonging the ! agony of the downward movement. What the j nature of this agony is only those who - are ! suffering can fully realise. Since January last, those who "hold sway" in the world's wool market have done everything in their power to impart a factitious value to wool, without practically any success, and they find themselves confronted to-day with unusually large offerings of wool during the next few months. As an attempt to rectify the situation abroad, it has been decided to omit the September series of sales, and to hold but one more auction in 1900 (instead of two as was originally arranged), to take place in October, , when the offerings will be limited to 250,000 bales. This decision was made prior to the opening'- of the July series, and announced before the business commenced, with the obvious intention of frightening the mills into buying without further delay. It _ was probably hoped that by putting the next sales so far in the future,; the , mantif acurers would be led to believe that delay on their part might ' be dangerous. It is~doubtful7 liojvver, if this'! scheme will be likely to accomplish much.' Manufacturers abroad are apparently determined, not to discount the future, 'and are not ' at all certain that present prices are at bed j rock. The holding 'of only one more series of auction sales, instead of two, in 1903 is al- j most certain to result in phenomenally largo stocks being cairied over to January next, when I the new clip will begin to come on the market, which will still further prolong the agony. Altogether, the situation, from an outsider's point of view, is exceedingly interesting, for, while it is to be hoped that the policy of with- ' drawing wool, and curtailing the number of auction sales, will be productive of a steady- I ing effect upon the market for this commodity, ! there is, we fear, strong ground for the assump--tion that the case will be' far otherwise. This rearrangement of the London auctions has, very naturally, been subjected to considerable criticism, and there exists, also very naturally, a rare diversity of opinion concerning it amongst those interested. It must be admitted, however, that it has served to steady the market, and check the decline at a critical moment, whatever the effect may be in October. On that point we prefer not to prophesy until we know. The outlook, for the time being, is a little brighter, although it cannot be said that trade in the manufacturing centres of the North of England is either brisk or satisfactory. On the other hand, the industry is not going to the dogs, as many have imagined. The penalty of last year's over-production and mad speculation has to- be paid, and in the meantime matters must be left to adjust themselves. The lower level of values has encouraged demand, and for the first time this year there is exhibited some inclination on the part of manufacturers to operate, even if only to fill up immediate requirements. The longer intervals between the series will be advantageous fathC than otherwise to dealers and consumers alike, as it gives a reasonable chance of getting the raw material into, consumption before fresh supplies have to; be met. * In surveying the whole position, the universally crippled resources have to foe. taken.

into consideration. Losses, abnormally heavy ones, have been general. The purchasing; power for actual requirements is'limited, whila\ speculative power ' isL exhausted, ' and consequently a period of cautiousness must naturally ensue. ■■ These, however, constitute factora , which go to/ produce a, healthier and-'soilrid'ei*' market, thus-enabling;; the -trade, to begin to recoup past losses 'by the steadigr (earnings oi' the future. ~ " . , It would be impossible to form any adequate! conception of the prospects for the closing. 1 ..series of Octoher without. taking into consideration the statistical position obtaining at this present time, and made known to us by advicea to ; hand ; from the chief centres by. this last inward '^risfio/jnail. The" total quantity of wool offered at -the July series, held in London, \yas, in i round figures/^gOgpOO^bal^s, of which only 130,000 Bales changed hands, leaving some--thing like 150,000 bales in the lofts, presum« ably for the next series. Beyond some Quee'hsla.nds of the new'clip, it" is not expected "thafi the list of new arrivals will bje expensively augmented, so that there will be>' little or ' no opportunity for testing values for wife entire new clip until January, except in the Australian sales, which open in October, or,' at tHe earliest, towards the latter end of „ September. To give an exact idea of what the users will have to draw upon, the present figures are given below, and compared withT" th.eS'stock available in the London market for'the»-l?tter half of 1899:— - " >■<.--

"As a further 60,000 'bales'are-' expected to a*r«, rive in time for the October series, chieflyJSTev/ ! Zealand, Port ' Phillip,' Queensland, Sydney, and. Caiie, the supply on the London market f6r-'the of the current year will be, in. round figures, 40,000 to 50,000- bales more- than last year for ,the same period, which, -considering the enormous weight of wool which has been carried all through the year, is perhaps as favoixrable a showing as could have been, expected. Will the absorbing power of the trade- be equahto the task before it? Until this problem is solved satisfactorily, there can be no certainty about prices, and if the eolution is arrived at in any ''other way, the outlook for woolgrowers in this and the adjacent . colonies is not very •promising. Wh'en things are at their very worst they are pretty sure to mend is the complacent self-assurance of many — indeed, the majority of iis, — and we must live in hopes of better things before the opening of -the New Zealand wool auctions. At the same time, the happenings of the past few j months m the wool trade point a moral, if , they do. not altogether adorn a taleT ..Growers must remember that it is not a time~to ham- • per their agents with hard-and-fast reserves, but rather to leave it to their discretion whetheito sell wool at the bid at auction, or deal otherwise ■ with it. *It is not edible, and it is hardly perishable, and must at some time or other be -transferred to the manufacturer — maybe at a much more awkward time than th<» present, oi perhaps immediate future? Attempts to bolsta: up a business of' this sort "can only end in disaster, and brokers, in their turn, would do well to take the lesson to heart. There can' be no. doubt that the majority of the buyers- attending the" wool auctions in London—more especially those hailing from the United States, who had taken the 3000-mila , trip in order to be present at the sales — were j disgusted at thfe heavy, withdrawals which have , consistently taken place .throughout the year, | and to this fact alone may be attributed the | lack of confidence in the bidding prevailing | fvom that quarter. ." The London trade are esI tablishing precedents which may react against i them in a po.veriul manner, and already there i are threats on the part of the American trado . to transfer /their* orders in the future to.,the , colonial markets. This is good news to vs — "' It is an ill wind which blows nobody any good " ; — but it goes without, saying that the present policy of withdrawing a'larj'" proportion ,of 'the wool whenever" prices tait^, a turn for the worse will drive away the support which may now be looked for, if the threat on the j part of American operators is carried into effect. English buyers have for years taken a -13,000-mile trip to attend the New Zealand wool aiiotions, and on various occasions the -tension >of feeling between buyers and sellers has been very acute owing to this very thing, so that it is not out of place, in view of the early opening of the colonial wool sales, to uttei a word of warning to those who are upholding the establishment of the colonial auctions, and to the growers who support them, with, we are convinced, profit to themselves in the long run, against adopting the policy of the London Woolbrokers' Committee if they find buyers are not to be forced to go beyon-fl their limits. It too often happens that a good deal of the wool offered for sale has a " string " attached to it, and it would be better if it were, not so. It is well worth while for the grower to remember that the satisfied buyer is U.e one who will be a steady customer, and tl^*t buyers who are reasonable are not to be brought up with a sharp turn. The total quantity offered! at all centres in New Zealand last season exceeded that of any previous one, and it may; reasonably be hoped that the ensuing season, will be a record one as regards the offerings, though prices must of necessity be on a considerably lower basis than that wKich obtained; Jast season, arid, caused so much havoc among

the English and foreign' importers and throughout the trade generally. It will take much more than a normal revival of trade before any appreciable effect can be felt on the raw material after the experiences we have just gone through, and the sooner the position is realised the better. We hardly suppose it possible that there are any woolgrowers in the colony who are so dense or ignorant of the state of affairs as to imagine they are likely to do as well with their wool this year as they did the previous year, but if such there be, we wculd just draw their attention to the actual conditions here set forth. Growers who are expecting prices ruling last season at" the New Zealand wool auctions should look at other commodities, and see that they must come to actual conditions and accept values current if they wish to sell wool, as the markets are rapidly; becoming adjusted to the facts in the case— namely, that wool went higher than its intrinsic value, and that there is plenty of it here and abroad for all the demand that seems possible to come fiom everywhere in the business world. Dunedin, 31st August, 1900.

Spot ,-'yVAciual Stock ,<j,?Sj:Ock - for Sales of- 'for; Sales of Oct. 9, i/Sep<l)ec., 1900. -^--'^■-1899. „ ..Bales. "» Eale's. Sydney .. .«,„.;»,■' 75,000 f Queensland ..'"'.. ",^, 31,000 ,'--t49jt)Qo Port; Phillip .. ... .. 38,000 >36,000 Adelaide .. „ .. .„ 13,000 f"7-,000 Tasnlanian .. .. .. „5,000 -"'"7 I,OQO Sv^an Eiver - 4,000 ''' 5,000 Cape , .. 21,000 '.- .; IIjOOOPaikland, _ Puntas',' and . r" -•';";- ' J River Plate .." ., 2,000 ,'.T.'^16,'600 JSfe^jZealand „ ..*. 90,000," ' ;i - 125,000 :'■ Total -'282,000 "£-296,000