Wool Price Equalisation Scheme Mooted

Press, Volume CV, Issue 31007, 12 March 1966, Page 9

Wool Price Equalisation Scheme Mooted

The New Zealand Co - operative Wool Marketing Association, a woolgrowers’ cooperative marketing organisation, is putting up to its suppliers proposals for a price equalisation scheme within a wool growing season. The scheme was mentioned by Mr T. C. Allen, general manager of the association, at a public meeting held in Methven this week.

In a paper on price equalisation which Mr Allen has sent to suppliers of the association, he says that one of its only disadvantages would be to remove the gamble of seasonal fluctuations from those who liked to gamble. But he did not think that the country could afford this continued gamble with a main export item and any steps which could be taken towards the elimination of severe price fluctuations were desirable in the national interest. "I feel sure that if equalisation can be successfully administered it will have the effect of accelerating the one or two ensuing steps necessary for world wool price stability,” he added. Broad Outline In brief outline Mr Allen says that the scheme would involve a pay-out price of about 90 per cent of the estimated average realisations to be flxed at the beginning of each season. All wool would be appraised and/or binned on receipt into proper types which would vary in price according to style and yield. The grower would be advised of the price and in the absence of any objection, payment would be made as soon as the account sales could be conveniently prepared, although there would be some delay on binning. The wool would be handled as promptly as practicable by the association and sold to best advantage in a scoured or greasy state. The auction system would be used for this disposal where it was necessary and profitable and particularly where floor price protection became necessary. In this way a pool fund representing realisations over pay-out would be built up assisting, as a season progressed, prompt pay-out. At the end of the season the proceeds of the pool would be divided on a per lb basis and paid out to all suppliers.

Mr Allen notes that it was obvious that loyalties would be strained if prices rose sharply towards the end of a season of low early prices. A supplier could undoubtedly retain a higher margin of gain if he sold outside the association in such circumstances.

An examination of the last eight selling seasons, however, showed that in only two of these would circumstances have arisen which would have tempted growers in this respect, and even these had not offered a great deal of inducement. It had been suggested that an unusually fast rising market could warrant some rise in the price pay-out to discourage selling outside the assocation, and similarly if the market slumped below the pay-out price a careful watch would need to be kept on the pool funds in ease they became exhausted, and should this become apparent the payout price would have to be lowered.

Referring to the advantages of such a scheme. Mr Allen said it would protect the grower against having to take the lower side of seasonal averages, it would lessen the shearing scramble and remove the worries of when to sell. “It needs only success in promoting seasonal wool price stabilisation to set an example that could be extended into the International field, pointing the way towards the stability needed to ensure wool’s future in the textile world,” said Mr Allen. Later he said in response to an inquiry that if enough suppliers—say about 60 per cent—were favourable such a scheme would be implemented.

Just before he referred to the association's equalisation proposals at Methven, Mr Allen recalled that although wool production between 195762 as compared with 1952-57 had increased by 23 per cent,

the actual returns from the sale of the commodity in the latter period had decreased by £750.000. If the grower was to be asked to grow more wool then he needed to get more money for it. he said. 1 Over the last eight years he said that the average price for wool had been about 42d a lb and but for an average in one season in that period of 55d the average would have been fairly meagre. i Mr Allen said he did not think that an average price of 42d for wool was adequate. In his view 45d was barely adequate. Outside of exceptional cir-j ciunstances. he said that a depressive trend in wool prices was the order of the day and this had recently been confirmed by the chairman of the Wool Commission, Mr E. L. Greensmith, when he had quoted Food and Agriculture Organisation opinion as being that raw wool prices were

likely to continue to decline. Examples of the exceptional circumstances that had brought rises in price against the general run of the trend was the entry of Red China into the market In 1960. the India-China war in 1963-64 with Indian buying of wool with borrowed funds to equip an army, and in the same period the very cold winter in Europe which had cleaned , supplies of woollen goods, and the rise for finer wools in the current season because of the severe drought in Queensland and New South Wales. Referring to the harmful effects of price fluctuations on the fortunes of wool, Mr Allen quoted a report of one of the biggest combing organisations in the United Kingdom which indicated that they had reduced their wool stocks by 29 per cent and at the same time increased the synthetic side of their production.