WELLINGTON NEWS

Hokitika Guardian, 15 February 1930, Page 7

WELLINGTON NEWS

THE) WOOL MARKET. (Special Correspondent.) WELLINGTON, Feb. 13. Tlie first <-l tne scries of London wool sales whicli terminated on FebJ mary Gtli was by no means satisfactory, although towards the close there was a more satisfactory tone with keen competition. Prices however only improved very slightly abovo the lowest level. The position hangs on the old economic level of supply and demand. The output of wool has increased in recent years and is at present in excess of demand which has iot ke t pace with supply-. It is the demand that wants stimulating if tuore is to be any improvement- in values. Artificial schemes to raise values is much to be deprecated and aI! responsible men connected with the wool trade express this opinion. According to Messrs H. Dawson and Sons, the prominent London wool brokers, it is the pronounced opinion of wool manufacturing centres that the year ipromistp to see a largely increased demand for fins grades. There is no doubt, as the firm observes, cheaper wool values are eliminating substitutes for and auxiliaries to raw material. This may be true at the moment but the substitutes are being, cheapened through keen competition and scientific research and it would be futile to rely on their elimination.

The same opinion was expressed regarding margarine in its competition with butter, and although, butter prices remain at a profitabe level they are held in check by margarine for which there appears to be an excellent demand, at all events the margarine concerns are now very powerful financially and continue to earn huge profis. . . . The only scheme proposed in New Zealand and Australia is to limit offerings and- extend the sales. It is argued that it is unwise if not suicidal to offer more wool than the market can absorb and that argument seems uiianswerabiLq, but that proposal involves consideration of -other important factors jc-opcerned with the -economic- ' conditions.) ,6f New Zealand. If wool is not offered or •sold' it must be held by the't Owners, and few of them can afford--'.to'stand out of the money-for any.,length of time, that i,s. to say that mastp&f thorn will want: financing. Some will,'obtain funds from wool brokers or ffdim Rural Credit Associations or frorh' banks, but-.from whatever, source . the.,'money is obtained the ultimate burden will fall on the banks. ;

If supposing 160,000 bales-, are held over and such a quantity will, need to be kept off .the market if, prices are to be influenced upwards—and • if the advances on • the held over; wool averages ' £lO per bale it will mean that the trading banks will have to find £1,500,000 which will he locked up for some months; and -their numerous other, clients many of whose requirements are seasonal and urgent when required. The banks under such circumstances may bo forced to again raise the overdraft rate.

The present rate of 7 per cent is calculated to cause some check to imports like motor cars, and a further advance in the rate would cause a drastic reduction in imports which the Treasury would feel in lessened Customs revenue, with tho probability that the State finances would be disturbed resulting in a deficit and necessitating increased taxation. Holding over wool, or keeping it off tile market may be the easiest way of forcing up the price of staple but it has its drawbacks and in the end will fail to achieve its purpose. The . same thing is happening in Canada and the United States with respect to wheat, but prices instead of rising or stabilising are falling and the Governments are getting involved. In Canada, as here futile efforts are being made to flout the unchanging economic law of supply and demand for wool that requires to be stimulated and the time is opportune for an attack. The European money markets have eased since the beginning of the year which, will put more heart and more, confidence into the people, which is an essential factor in. the revival of general trade. Now that the United States shows a disposition to again make loans to Europe a revival of trade activity on the Continent may be expected, and that should help to absorb the unemployed. At the International Woo! Conference held in Bradford a few weeks ago attended by delegates from the European entres, the “Use more wool” campaign came up for consideration. Too Bradford representative, Mr Hunter thought the imperative

point to consider was tile cost of wool goods available for the consuming public and declared the consumption of wool would he doubled or trebled wool goods could be bought to the general public at prices which had some relation to production costs. Raw wool is cheap but wool goods are dear which, means that the costs of distihutioii are out of all proportion to tho costs of production. The cost, of distribution should he the point of attack for wool growers, and the relatively high cost of wool goods in New Zealand will stand investigation.