TOE WOOL REVIEW.

Waikato Times, Volume 102, Issue 17220, 1 October 1927, Page 22 (Supplement)

TOE WOOL REVIEW.

FEATURES OF AUSTRALIAN SEASON. THE SPECULATIVE ELEMENT. “The element of speculation in wool is much less in evidence so far as the Australian clip is concerned than it was in the earlier period of local realisation,”'says Dalgety’s Annual Wool Review for Australasia for 1920-27. The publication then goes on to state: —

“Time was, in the pioneering days, when the speculating buyer was the backbone of the struggling local markets. Merchants who purchased wool for re-sale in London, and used the proceeds to save exchange, accepted the speculators’ risk, and some early Australian operators w r cre speculators pure and simple. In the days before cable communication with the Old World was an accomplished fact the risks were great indeed. Buying wool was a venture requiring a good deal of capital and infinite pluck, and fortunes were made, and lost. Naturally the middleman speculator took as little risk as possible • and bought on as safe margins as he could. As, however, the markets grew 7 and attracted the direct representatives of users and commission buyers representing the world’s consumers the margins disappeared, and the speculator passed out of the industry. Now and again, when wool faces a rising market, the speculative element rears its head again, hut when the inevitable slump comes the speculator suffers heavily and decides to invest his capital in less risky undertakings. Since the slump of 1924-25 there has been little speculation in wool—that is, buying purely as a gamble. It is really Ibis absence of speculation which has enabled the restoration of confidence to come about to such a pronounced degree in such a comparatively short time. The fact that there were big clips available frightened off the speculators—they glory in a shortage and famine prices—and the fact that those big stocks were offered freely and sold at market values gave general confidence. The strong consumptive demand during 1925-20 built, up a sound position. There was a big excess of wool available, hut it practically all went to the Continent — especially to France —and this season with the conditions in that country unfavourable, there was more difficulty in keeping the price level stable. It was done mainly through the splendid support of the Japanese and German sections, and good solid buying at times on Yorkshire account. Nothing can, of course, prevent anyone with money having “a dabble in wool” In a rising market, and possibly to some extent it has happened this season, but not to such an extent as to have any appreciable effect upon the market. The rise in values was in no sense due to speculation, but rather to an improvement in the general demand for wool, reflecting mill activity in those countries which were most prominent. It was a natural development, the result of growing confidence in the soundness of the outlook. Increasing Number of “Lots.” One of the problems associated with the marketing of wool in Australia is the natural swelling of the number of “lots” of wool in the catalogues. In large measure this is due to the trend of closer settlement which is steadily replacing the old-time large clips with their big straight lines of wool by a multiplicity of small clips. There is, however, apart altogether from this, a distinct tendency in most centres for owners to cut up their lots to what might he described as an unnecessary extent. ' The object of “lotting” wool is primarily to secure evenness, and whilst no better results accrue from the cutting up of one big lot of even w r ool into several smaller lots, it naturally increases the work of setting .out the catalogue on the show floor, of valuing the wool, and of actually offering it at auction. It is in actual practice the number of lots offered per day which is the real effective regulation of offerings. In a centre like Sydney the daily offerings run into 11,000 bales, between 750 and 950 large lots, and, say 700 to 1500 star lots. Indeed, during a portion of. the season the “star” (or small) lots range from 1000 to 2000 per day. Thus when considering the question of whether the daily offering can be increased from 11,000 to 12,000 per day the number of lots involved becomes the real factor. If by making larger lots or a more liberal system of interlotting the actual number of lots to be inspected and valued can be reduced, then clearly the daily offering in bales can be increased without detriment to the market (given normal conditions in regard to finance, shipping, and so on).

The Inevitable Result.

If, however, the daily total is increased without any attention to the number of lots, it is easy to see that a point may he reached where more wool is offering than buyers can inspect, the inevitable result being irregularities in the competition. In the case of Brsbanc, lf>,ooo, 17,000 bales and even more are offered on some days, but the system there is to provide an extra day for valuing the wool, and so no difficulty-is met with. In the big Australian centres where sales are held regularly each week, no auctions take place on Fridays, that day being left to buyers to attend to shipping, going through “samples,” and so on. If Friday was made a regular selling day it would be possible to increase the weekly offering without strain, but buyers would protest strongly against such an innovation. Sydney market has a grievance in having to stop sales whilst buyers go to Brisbane and Melbourne has a similar grievance with Adelaide and so on. There is a movement in favour -of separate buying stafis lor each centre, and although the time is hardly ripe yet some such system will sooner or later become inevitable.

Valuations and Reserves, The practice of allowing owners to place an arbitrary reserve price upon lines of wool submitted to auction at times has a very prejudicial effect upon sales, owing to the mistaken idea apparently held by the grower that if he “reserves” the wool at a figure in excess of the selling broker’s valuation he is forcing his selling agent to get a belter price for the wool.. The question of valuations and reserves has been a sore point for many years, and, unfortunately, gets worse rather than better. There were periods during Lho season —more particularly towards Um end —when many growers bad inflated ideas of the value of their wool and. loaded it with reserves at pence per pound above the market level. Even A’hen the selling broker, in giving his

valuations, had a little margin “up his sleeve,” a weaker market for top lots meant the passing in of quite a lot of these descriptions. Frequently wool was catalogued when growers’ reserves rendered its withdrawal a foregone conclusion, which is simply a waste of catalogue space, time in showing, valuing, and so on. Moreover, it does not help to create a good atmosphere in the wool saleroom. Preliminary Valuations. The practice of making preliminary valuations of wool and advising owners has grown up with the local trade, but has its distinct disadvantages because owners do not appreciate the conditions under which such valuations are made and their inevitable limitations. The preliminary inspection of the wool must necessarily be a bmited one. The bales are not fully opened up and generally the value is appraised upon a hand sample which may not be thoroughly representative of the wool as a whole. Again, the valuation is made on the basis of values then current, whereas values are subject to daily fluctuation to some extent as the demand for different types varies. On the morning of the sale, when the wool is properly opened up on the show floor, it is possible to value wool on more scientific lines and to give an approximate idea of the market value of the wool, but no man—buyer or seller —can say with certainty .what price the wool will bring, because that depends upon quite a variety of factors. Method of Operating. Buyers in Australian wool selling centres mostly operate upon “orders,’ and these are received, by cable and vary from day to day. Thus one buyer may have a big order for a certain description of wool and may have elastic limits in filling such an order. The result is that he forces the market upon these descriptions to the extent of his limits. When his orders are filled there may possibly be a lull before he receives more orders, and with dozens of buyers in this position it can easily be seen that minor fluctuations are inseparable from the market. Sometimes several buyers will have urgent orders to buy certain descriptions “at best," and “the sky is the limit" for a while, but at otnei times they are restricted to definite limits and definite qualities. Then again experts differ when it comes to valuing wool. One buyer will form a more favourable opinion of a wool than another, and estimates of clean yield will vary _