The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” GISBORNE, TUESDAY, OCT. 24, 1939. THE WOOL COMMANDEER

Gisborne Herald, Volume LXVI, Issue 20076, 24 October 1939, Page 4

The Gisborne Herald. WITH WHICH IS INCORPORATED “THE TIMES.” GISBORNE, TUESDAY, OCT. 24, 1939. THE WOOL COMMANDEER

Although the wool growers of the Dominion are still awaiting a detailed statement of the conditions under which tiie wool clip is to be sold to the British Government, much of the required information was apparently made available to the Australian farmers simultaneously with the official announcement from London. From the details given in Australia, but withheld in New Zealand, it is now possible to obtain a better idea of what the position of growers will be for the present season. The most important disclosure is that the purchase price of 9.8 d in sterling for the New Zealand clip will be the price to the farmer in store, and not f.o.b. It is stated that in Australia approximately vd a pound will be added to the price to cover costs from store to shipboard, and it is to be assumed that a similar procedure will be followed in New Zealand. An advance of 90 per cent is to be paid within 14 days of appraisement and the ballance of 10 per cent after the close of the season. On the face of it, and by comparison with last season, the growers appear to have been treated fairly if not generously. Before any final

judgment can be given on the point, however, there are other factors which must be taken into account, and some of these are far from unimportant.

The statement made by Mr. Nash last week was to the effect that the price had been fixed for the period of the war and one year after, but in Australia and Bradford it has been assumed that the price will be subject to revision each season. It is almost imperative that this course should be followed, for otherwise, with costs in New Zealand spiraling upwards, the growers may be in a difficult position in future seasons. In the first year of the last war, New Zealand wool averaged only £ls a bale, but thereafter the average was more than £22 a bale. The rapid advance in those days was largely due to the inflationary trend in Britain itself. With the infinitely more flexible monetary system now in operation inflation in Britain is likely to be effectively checked, but, at the same time, there is a very real danger of the position in New Zealand getting out of control. This danger is illustrated by the present position. Mr. Nash stated that the London price of 9.8 d was equal to 12jd in New Zealand currency. but on the basis of the effective rate of exchange the payment o! 12Jd in New Zealand is equal to only about. 8d in sterling. As costs in New Zealand continue to rise under the influence of an inflationary policy the real return to the wool grower will be proportionately reduced and a price which appears satisfactory al the moment may be disastrous in a few years’ time.

It is essential that the grower should be able to cover his costs of production, but his future ability to do this will probably depend less upon the prices he receives than upon the costs he has to meet. If costs could be stabilised at the present level, there would be little occasion for concern, but the Government has already found that costs are beyond its control. Unless some agreement is made for a revision of prices, therefore, the farmer is in danger of being caught between a fixed price on the one hand and ever-rising costs on the other. Since the British Government can hardly be expected to pay for higher costs that are peculiar to New Zealand and due solely to internal causes, the obvious remedy is to' base the New Zealand cost structure in ratio to overseas prices. This point can be better appreciated, perhaps, if it is understood that the price to be paid by the British Government, even if it is varied, will be fixed primarily to meet Australian conditions. If, therefore, New Zealand costs rise out of proportion to those of Australia —and they have already done so —the Dominion will inevitably suffer. There could be no more disastrous mistake than to assume that, because there is a commandeer, costs are a minor issue and that it will always be possible to obtain a price sufficient to meet them. On Ihe contrary, costs still remain the important factor in the production of wool.

It must not be overlooked that the war is only a passing phase and that when the war is over the wool grower will still require to dispose of his product in the markets of the world in competition with synthetic materials. Under the agreement with Great Britain, the Dominions are to share in profits from resales of wool to neutral and Allied countries, It is not a matter of agreement, but it should be the aim of both parties to preserve, insofar as is possible under war conditions, the markets which are already established. Experience lias shown that countries which have had difficulty in obtaining supplies of wool have developed artificial fibres and it would be nothing short of tragic if the wool commandeer had the result of accelerating this trend and increasing the existing competition for the natural product. If the artificial material gains a market as a result

of the war it may be difficult to displace afterwards, and for this reason every effort should be made to retain the outlets which are now available lo the wool-producing countries. Again, however, ii is largely a question of cost. The high prices received during the last war resulted in the wool production of New Zealand being increased from about 500,000 bales a year to about 050,000 bales and latterly to 800,000 bales. This larger output can only be sold under normal conditions if the price is reasonable, and to the extent that costs are forced up the whole industry will be jeopardised.