WOOL MARKET

Otago Witness, Issue 3475, 19 October 1920, Page 8

WOOL MARKET

PRODUCTION EXCEEDS CONSUMPTION. GROWERS ADVISED TO HOLD. (Fhom Ous Own Coekespondent.) WELLINGTON, October 14. The following is the text of a cablegram on the subject of the wool market in Ureat Britain, received from the High Commissioner, and read by the Prime Minister in the House this afternoon: "With reference to your telegram of have met the Director of Raw Materials, a committee of London woolbrokers, the London and colonial wool importers, Australian woolgrowers, and others interested in the trade, and have now reported. The report will be sent by mail. Following are the principal points: " Firstly.—The stocks of Imperial Government and Australian wool in the United Kingdom and elsewhere, afloat, and in Australia, on June 30, amounted to 2,049,177 bales; ditto New Zealand, 856,377 bales—rougniy one and a-half years' production. Allowing for the stocks which will be held in a normal year, the stocks of Australasian wools on June 30 were approximately' 1,650,000 bales in excess. Stocks of South American at the same time were,estimated at 200,000 bales above normal; South Airiea, 100,tXK) bales ;—making a total roughly of 2,000,000 bales in excess. Whence it seems that the world's wool production has gained, on the world's consumption since the- outbreak of war by about five months' growth. " Secondly.—Since November, 1918, about 17 months' growth of Australasian wool has been disposed of in 19£ months, and it is evident the world's consumption has not * equalled production since the armistice. Thirdly.—War conditions forced • to extreme figures, and enforced economy of ' manufactured goods amongst the civil population. The purchasing power of the woolconsuming population of Europe was enor- ' ynously reduced, and to supply the impoverished nations with wool extended credit for home consumption is difficult and risky, and a return to normal conditions can only be gradual. "Fourthly.—A reduction of the current Australian clip, estimated at 400.000 bales, through the. drought, will assist the general position; but the most that can be hoped for in the immediate future is that consumption will overtake production. "Fifthly.—A surplus of 2,000,000 bales, therefore, must be held for a considerable time, and can only go into consumption gradually. The problem, therefore, is to ensure its being held in such a way as to minimise as far as possible its detrimental effect on the market. The problem is made more difficult from the New Zealand standpoint by fashion, and the demand being strongly in favour of fine wools. Fifty-five per cent, of New Zealand stocks are of a class now selling badly, as compared with 6 per cent, of Australian. Thirty-four per cent, of New Zealand are fair-selling lines, against 15 per cent, of Australian, and 11 per cent, are the best-selling lines as compared with 79 per cent. ' " Sixthly.—Low crossbred wools are comparatively cheaper to-day than the majority of other raw products, and sodner or later must return to normal. It should be one of the safest things to hold for all practical purposes. Wool can be regarded as an imperishable commodity. The Australian Committee are endeavouring to assist the position by spreading wools of the current Australian.clip over a period of 12 months, by limiting the amounts offered at Australian and London auctions. They anticipate that if the banks, brokers, and growers work together the financial part of the holdover can be carried cut without Government help, provided the Director of Raw Materials co-operates in feeding the market gradually with Imperial Government stocks. The New Zealand Committee considers thatsimilar control in the case of the dominion can be carried out only by the Government, I which, of course, they do not recommend, because, firstly, while Australia is the dominant factor in fine wool' production, New Zealand is not in crossbred, and if the dominion attempted to withhold its clip the result would be to give the market to other crossbred-producing countries; seco&dly, the crossbred clip is already spread over 12 months, as approximately half the total produced in each hemisphere, hence the committee considers that any attempt at interference would result in more harm than good. . "Seventhly.—As the whole of the world's wool cannot go into consumption in the ; immediate future at any price, somebody : must hold a portion. The dominant factor at present is the Imperial Government, r.s holder of the'world's accumulated surplus department, has shown no desire to unduly force its wools on the market, and the committee suggests that the Government of. : New Zealand should request the Imperial I Government, urgently by telegram, to give j an undertaking not to unduly fore its wool j on the market, but to hold stocks firmly, ' and only place them on the market in such | quantities as will be absorbed without seriI ously depressing prices. This •would steady

the position and restore confidence throughout the whole : industry, and apart from the sentimental reason, would benefit the Imperial Government, as a serious* decline in crossbred values would hit the British Treasury. "Eightly.—The committee think it is clear from the above that crossbred wool has a future, and that if those growers, financially able - to do so, hold their clips_ until the consumption _ and the change in fashion make more impression on the stocks. This will assist the whole position. Some one must hold the wool, and it is better for the financially strong growers to do so, for the speculators to step in. The committee considers the New Zealand Government should make the whole position known to growers, and it urges those who can do so to hold back their wools as long ag possible. "Ninthly.—New Zealand growers could also assist to make the; market profitable to themselves by increasing their ewe flocks wherever the country is suitable, thus providing for increase of meat, particularly lamb, the outlook for which the committee considers is very good. "Tenthly.—No difficulty is anticipated in obtaining tonnage to move the New Zealand clip, but in addition to cheaper storage there >are advantages in holding the wool >h New Zealand, where it is not such a'menace, to the immediate future of the market as it would be if stored in London. Further, the capacity of London to receive and store the wool is limited at the present moment, and before sending wool to London for sale growers should ascertain that it can be accommodated. If desirous of holding the growers should hold in New Zealand, only sending to London if they mean to meet the market and take what they can get for it within a reasonable time of its arrival. - "My officers have been present at meetings, and generally concur in the recommendations contained in the report."