THE WOOD MARKETS

Southland Times, Issue 21192, 19 September 1930, Page 11

THE WOOD MARKETS

STABILIZATION OF PRICES. CONTROL OF SUPPLY DEPRECATED. GROWERS ADVISED TO SELL. Urging that restriction should not be attempted with out the support of other producing countries, a recent article in an Australian journal analyses very thoroughly the scheme now under consideration for the establishment of the Australian Wool Association which is planned to have control of all the wool produced in Australia. It points out that though the wool trade is passing through a period of depression, there is no indication that this state of affairs is likely to continue, particularly in view of the recent firming tendency of the Home market, and it advises growers to sell their wool at current market rates rather than face the possibility of having a big quantity on hand at the end of the season.

With the continued slump in wool the growers and their organizations have endeavoured to find some way of reorganizing the industry, and various schemes have been propounded which have alternatively been commended and condemned, states the article. The most recent plan has been approved by the graziers’ associations, and it will be interesting to see how the next move is made to bring the organization wanted into existence.

Having been used to good wool returns there is no doubt that the growers are very dissatisfied with the present state of the market, and perhaps it is only natural that they should turn to Bawra to provide a model for organization purposes as far as marketing is concerned. Most of the plans suggested have had the bad features that the Government should be introduced as a buyer or financier, and it is well that the Federal Government decline the assistance sought as otherwise the wool-growers might easily have been up against greater problems in the future. Basis of Prices.

The scheme now under consideration provides for the establishment of an organization called the Australian Wool Association which will have the control of all wool produced in Australia. The wool is to be marketed under similar arrangements to those at present existing and the brokers will take part in the same w’ay as usual. The change suggested, however, is to appraise all wool coming into the store, and the value arrived at should be the minimum sale price. This price is settled at 1/- a lb for the balance of the- present clip, 14d for the 1930-31 clip, 15d for the 1931-32 clip, and after that cost price plus 15 per cent. This is just where the trouble is going to arise for it is a moot point whether the buyers will be dictated to as to the minimum prices they must pay. It must be remembered that Bawra sold on the open market and made a profit on the wool held merely because the world was clamouring for wool, not because of the high reserve prices, and if there had been ample supplies in the world then that organization would not have ben so successful as it actually became. People seem to overlook this point, however, and when they talk about organization they always stipulate that wool shall be sold at their own figure. How the buyers will view this remains to be seen, but it is not difficult to hazard a guess If they want the wool they will take it, but when their idea of value does hot coincide with that of the Wool Association it will be carried over. Thsi will mean that unless the demand for wool improves very considerably Australia will be holding, an increasing quantity of wool on hand, which will merely act as a further drug on the market'. When the appraisement price is not reached at the sale the association will take over the wool and pay the growers their net proceeds. Under ordinary conditions it would be comparatively easy to arrange finance on the security of wool in store, but it would be-doubtful whether any bank would grant an advance on wool which

might be held up for years before sale. It is extremelv hard to obtain any accommodation at all under existing financial stress, and if there would be any doubt that the money would be tied up for an indefinite period the request would certainly bo refused. How then could funds be procured? The Government has already refused to give financial assistance, and it does not seem that there is any other revenue, so that the association would be helpless right from the outset. • The idea is to take control of all wool marketed immediately, but the moment is singularly inopportune to attempt any new financial .schemes and it is hoped that the promoters of the scheme make certain about the availability of their funds before they make any move. .Pruning of Expenses Necessary. What the wool-growers will not realize is that they are passing through a lean time and they will have to put up with it and cut down their expenses as much as possible until conditions improve. The world has too much wool at present, not because it cannot obsorb the output, but because the people of the consuming centres have not enough money to buy woollen goods. Other clothes have been cheaper, and as a result the growers have suffered. Yet others have suffered in the past and have recovered again. Practically all industry has its depression periods, and although there are times of hardship they do not last for ever.

Wool is just the same as any other commodity in its connection with economic laws. When its prices are good, growers are encouraged to increase their production and people who would not otherwise be interested try to join in getting the benefits offered. When prices are low the reverse is the case, for all who can transfer their activities to some other channel which produces better results do so.

Ever since the war wool has been profitable, and as a result sufficient inducements have been offered to foreign countries to join in the industry. South Africa and foreign countries have all wanted their share of the spoils, and as a natural result supplies of wool have increased very considerably, and now returns are poor. But there is nothing to indicate that this state of affairs will continue, for there is bound to be the gradual recovery which always follows stagnation. Cattle raisers in Australia had practically lost heart in their industry after years of poor returns, but now it has become one of the most prosperous industries in Australia, and promises to remain so in the future. This is an illustration of recovery after years of depression, and it will occur again in the case of wool, the existing circumstances is to sell their wool at ruling rates, so that there will not be any material amount of wool on hand at the end of the selfing season. If prices show a tendency to rise next season the growers will obtain the advantage of the rise, whereas any large quantity of wool held over would act as a drug on the market. It is better to have low prices and be done with them, so that the market can have a chance to recover. Recent sales in Sydney and London show that there is a firming tendency, and, even though the rise is slight, it is of importance. Provided that the market does not keep falling, there is always hope that the worst is over, and in this case it looks as if 'there will be a gradual rise. If this continues there will not be any necessity to continue with plans of marketing associations, as growers will not have to worry about such things if they can get profitable prices. Feeling of Other Countries. It is only when times are bad that there is a continual worry and propounding of schemes to ease the situation. Even so, nothing should be arranged without consulting the growers, for. they are the. people directly interested. If the sponsors of the plan adopted by the Graziers’ Associations really desire to carry on with it, then they should first of all provide for a ballot so as to allow each man the opportunity of voting. If the'’growers desire the plan to be put into operation the feeling of South Africa should be ascertained, together with that of New Zealand, for without their active support there could not be any other

result than failure. Restriction has been tried time and time again in other countries, and it has not been satisfactory yet in any instance where complete control of the product has been missed. Experience has proved that control in one country merely encourages additional production in another, and this would be so in the case of wool, for it could not be said that Australia had a monopoly ’of the world’s wool. This being so, the mere fact of withdrawing wool from the market here would be a big inducement for buyers to turn their attention to such places as South Africa, where they can get cheap wool in abundance.

Restriction should not be attempted without the co-operation of the other main producing places throughout the world, which should be approached as soon as possible to give a decision on the matter. If they are agreeable that will be a distinct advantage, but if not Australia should not even consider any scheme of control.