COMMODITY MARKETS AND PRICES.

Manawatu Standard, Volume LVIII, Issue 46, 22 January 1938, Page 5

COMMODITY MARKETS AND PRICES.

LONDON WOOL SALES. (By “Penloo.”) A few days ago a pessimistic feeling pi evaded regarding the outlook for wool at the first London sale for the year. The sale begun last Tuesday evening and the first reports show that instead of the market, sagging there was an actual advance. The best quality of fine wools advanced a halfpenny, but all grades of crossbred were up a halfpenny to one penny per pound. The rise in crossbreds is of most interest to us, and the rise brings prices back to what they were before the drop in November last.

The advance in crossbred wool prices is not without political significance. As is well known, crossbred wool is idmost exclusively used for military uniforms except perhaps in Italy and Germany, and the demand now noted could not have been long postponed because of tho increasing number of men who have joined the defence forces. The demand has conic mainly from the Continent, II ussia being a prominent buyer of greasy crossbreds. Some people would deduce from this that war is imminent, or that Russia intends to take a firm hand with Japan. Whatever the cause New Zealand woolgrowers are thankful to see a rise in wool values.

Wool is unquestionably our most remunerative primary product at the present time, and that must tempt a lot more dairy farmers to do less dairying and more sheep-farming, a trend that has already been noted. Moreover the demand for sheep may reduce the volume of exports of mutton and lamb. Such curtailment must cause Britain to import more meat from the Argentine and Uruguay, and once we lose the connection it would he difficult to recover it.

The lack of Japanese competition has not affected the crossbred position, but it has had some influence on the prices of fine wools in Australia. The limited buying on Japanese account and the absence of American competition at the New Year. London sales have been chiefly responsible for the reduction in values which lni6 occurred. The fall in prices in Australia, however, has been given further impetus by forward selling of wool at lower figures than those prevailing. Circumstances have provided the favourable conditions for “bear” operations, just as they did for some months prior to December. Such action is certainly regrettable from the viewpoint of wool sellers, but in reality “hears” are speculators, and if tile demand for wool were stronger and gave signs of further increasing, the speculative element would probably be buying freely to cover commitments and their competition would be a factor in pushing prices upwards. Although periodically there are fulminations against “bears,” tliev cannot be cleaned out of a market “Bulls” and “ bears” may be troublesome at times, but they serve a useful purpose. Both make losses on occasions.

There is some concern .in Australia at growers withholding their clips from sale because of statements forecasting when Japan will resume major operations in the wool market. No one can forecast this, not even the Japanese authorities, for the longer hostilities continue the less will be the purchasing power of Japan, it is claimed that a continuance of the policy of withdrawing wool from sale will lead to, a considerable carry-over at the end oi June. The trade will be taxed to the utmost to lift the balance of the 193738 clip by the end of the season. Some authorities even now regard a carryover of 200,000 bales as inevitable. The disposal of each year’s wool clip depends upon the co-operation of growers, brokers, buyers and shipowners, if there is a break in their co-opera-tion the whole selling system is imperilled. But no one has . the right to presume to advise growers, who are free to do as they please with their own property; but holding back wool just now in the expectation that Japan will shortly resume buying is rather risky. There docs not appear to be much chance of Japan entering the market for some time to come; at all events not before the end of June, for whatever foreign credits Japan may possess will be needed for the purchase of raw material, or rather war material, and scrap-iron is one of the most important of those. If wool is carried over into the next season that would endanger the prospects of next season, for it may happen that supplies will be in excess of the demand as was the ease a few seasons back. The returns of the trading banks for the month of November in some degree show the business trend in this Dominion. The demand or free deposits, at the end of November, at £32,622,042, show a shrinkage of nearly £700,000, while the time or fixed deposits at £32,336,630 show an increase of about £25,000 on the figures for the month of October. The free deposits in November were tho smallest for the year. These free deposits represent spending power, for cheques can be drawn against them, and it would seem from this, as one official stated, we are spending up to the limit of our income. The free and fixed deposits combined at the end of November totalled £64,958,672 or about £675,000 less than at the end of October, and, about £500,000 less than at the end of June.

The advances and discounts combined increased for the third month in succession. The total at the end of November was £54,781,396, an increase of nearly £2,100,000 over the preceding month. Compared wjth June last, the increase: is over £7,000.000. which is rather substantial and requires explanation. It may be due to the increase of imports requiring more funds, or it may 'he due' to the increased costs ■ necessitating the use of more capital in business. Probably both factors are responsible for the increase. The note circulation at £9.547.362 showed a small increase over October.