YORKSHIRE LETTER.

Dominion, Volume 4, Issue 1008, 24 December 1910, Page 18

YORKSHIRE LETTER.

FUTURES: THEIR USE AND ABUSE. (From Our Special Correspondent.! Bradford, November 11, 1910. A grower may look over his flock and think the fleeces all of one quality, but it would surprise him if he could follow his wool from tho-station right , to the finished . article. The raw material may appear similar in quality, condition, and character to the casual onlooker, but to the practical man it differs very considerably. There is nothing more educativo for. a wool grower than to walk round a warehouse, when, say, 10,000 bales are being offered for public auction, for what he.-then sees will convince him that wool is far. from being all alike. Tho time of the, year has arrived v.*hen users naturally look round their stock rooms and begin to-operate in. the special qualities they are likely, to require during the coming season. ;. Naturally, . nobody likes to buy and cover all their requirements at express speed, especially at a time like the present, when the impression is general that, there is enough wool in sight, to meet all the wants of the world during tho next twelve months. The custom of the trade is to go steadily on, although of late years there has perhaps;,more buying forward and so anticipating ■ future requirements than is customary. Those who. liavo not done • this have been left completely out in the cold, and that is always the case when we have rising markets. .Those firms who buy only from hand ■ to, mouth cannot possibly offer business at; such reasonable terms as those who, have the pluck to cover when values, are'low, hence there is at the present time a tendency to increase this forward business in the'shape of "futures" in the hope -of the same being an advantage : later oil.

' THE ORIGIN- OF PUTUBES. : Perhaps . there is a larger weight of actual business'done in -the shape of forward business .than is generally supposed. Here the force of'custom enters into the proceedings, as well as now and then.'a little spirit, of the spirit of ■ gambling. The real origin of futures is largely the outcome of manufacturers and spinners wanting to anticipate their future requirement's and.cover.same. How is the thing actually done? Suppose now a manufacturer in Bradford books an order for 1000 pieces of blue serge, and ho'has to deliver say 250 .-pieces at the end of. tho first month, 250 the second month, and so-'on until the contract'is run out. That manufacturer does not'want to be on the tenterhooks during tho four or five,,months in. which ho is making and delivering the pieces, so ho goes to the yarn spinner-and fixes up a contract by purchasing 10,000 pounds weight of the special quaiity of yarns which will be required to complete tho order. Having made the best bargain that, he possibly can, he-signs awritten agreement to purchase from that firm the amount' of yarn required at a given price, delivery to be given as-per "particulars" sent in. The spinner having sold these yarns-forward he naturally wants to feel in a comfortable position, so ho goes to the topmaker and buys froqi him the tops required for the. production of those yarns. Of course there is oftentimes a little bit of haggling over the price, but eventually he agrees to take a certain weight of material, delivery, say, 100 packs per month. That topmaker having accepted responsibility has to set to work to buy raw wool in the cheapest market he possibly can, and accordingly buymg_ orders arc executed cither in london, colonial, or South American markets. Here-we have in brief the origin of the forward buying and selling, which now forms such a leading-part in tho wool trade. Were it not for these transactions theTc would bo little: incentive on tho part of anyone to- buy freely, and when all-is said and done there is something commendable about this class of business. It has saved many a man from worry and enabled him to, carry out his contracts with conspicuous ease and ability- Of etiurse, there enters into these transactions a certain amount of speculation, and there always will do. However, there is 'such a thing as speculation without gambling, and X must say that there is a great deal- lbsscofntheilatter-'iivcon-nection with the trade of the West Riding than there is on the Continental tormc I markets.- As a matter, of-fact, dealing in "futures" is not known or 'legal in England.

| CONTINENTAL TERME IfABKETS. . Only those in close touch with the markots in Trance and Belgium can have any conception of. the gigantic business that is put through almost weekly, and it is in order to say that thousands of packs of tops are sold and bought which never go beyond mere paper, tho transactions being very similar, if not identical, to tfiose of futures on the Cotton Exchange at Liverpool. For instance, at Antwerp alone,, on November 31, several firms wero committed on a signed contract to deliver over .5 million kilos of GO's River ■Plato .wool tops, but the greater. portion of these, contracts will have to be settled without ( the. delivery of a single pound. The business is known exclusively as paper transactions, tho firms- engaged simply receiving and paying differences. A sells B, say, one thousand kilos of tops at a certain price, delivery in January. That firm may sell for a rise or a lall, and on the day of settlement either the' buyer or tho seller. has to pay the differences, according to how quotations stand on that date. It is exactly here where the difference comes in -between the forward sales of tops on Bradford Exchange, and those paper transactions put . through at Roubaix, Antwerp,'and Havre.' At the Yorkshire premier centre all forward sales aro only completed when actual delivery of the last pack-of l tops has been made, it being very, seldom indeed that .either buyer or seller.'is called upon to pay the, difference.- The - writer ■ has known . the trade, all-his-life,' and only in times of slump ,have differences been paid'and received', but in nine cases out of ten tho actual weight of material contracted for is delivered. No man can take exception to this kind of business, but I unhesitatingly say that when "futures" are expressly used for the purpose of'"bulling" or "bearing" tho market, then unreason- - able use is being made of a system which was never, designed for that purpose. Forward : business is right enough, and if men would only use the privilege in a rational and sober way then we should be oftentimes spared' the agony of seeing prices so manipulated as to cause loss, which under ordinary circumstances would never have resulted.

HEAVY SALES TO DEPRESS PRICES. A feature of'the Continental terme markets during. the past three months has been the heavy/sales for the express purpose of depressing wool values at Australian selling centres. "Bears" began operations as early as last July when they agreed to accept responsibility for delivering merino-tops in January at about 40 to 45 centimes less than the price ruling ' for delivery - that month. There seetas to. be a big difference between "spot" and future delivery, and a good few million kilos have been sold during the months of July, August, September, and October. As an actual fact the forward sales Eavo not affected prices as the majority' anticipated,' and instead of values declining seriously they have romained fairly high since the opening of the -sales in Australia. Tho belief is very general that good long combing wools are the dearest, and selling.by a long way the best.- The current Australian clip is a little .disappointing, notwithstanding • the good season that has been'experienced. No doubt plenty of rain conduces to a very prolific-state of vegetation, and weeds and -grasses grow fast and seed equally- as quickly. Consequently: there is: evidence .of both the ; trefoil and Bathurst burr plant spreading at a, rapid rate, and for many rcasonst this is to'be .regretted.. Free, clean wool is.always! an advantage, and it is a pity that so. "much of tho Australian clip is infested with burrs. This is bound to suffer more or less in price,' and users always pay proportionately more for good, clcan wool than they do for faulty descriptions.

THE MARKET. STILL, QTJIET. ' In consuming centres thcro remains ill evidence the same' white heat' of consumption," but as regards new business in tops and yarns, this is vet unsatisfactory. The fact is, spinners have now covered all their requirement for practically the first two months of next year, and users who are dissatisfied with what they have 'had to pay, are still doint; their utmost to make: their influence felt upon prices. Many more contracts could be fixed up if importers could sell at 2s. 2d.''standard 64's tops, but-they, canuot, hcnce spinners are' adopting a very independent atl titude. -