COMMODITY MARKETS AND PRICES.

Manawatu Standard, Volume LVIII, Issue 52, 29 January 1938, Page 15

COMMODITY MARKETS AND PRICES.

the securities markets. (By “Penloo.”)

The stock exchanges, hoth hero and in Australia, are quiet, and in this they are reflecting the conditions in the overseas exchanges. Investors are uncertain as to the immediate future, and are therefore acting with caution. While they can not be blamed for this, it must be obvious that if everyone ceases buying the effect would be to accentuate the dullness. Fortunately, investors do not all think alike. One section argues that there is a recession in business generally; therefore, turnover and profits must be lower, and some companies may be compelled to reduce dividends, or at least maintain the rate of dividend at the expense of reserve. Another section of investors contends that the recession cannot be more than temporary, perhaps a few months, for the underlying conditions are sound. Equity shares are now more or less depressed; therefore, this is the time to buy those with potential-prospects for future capital appreciation and it is probable that the latter class of investors is right. The tendency with many investors is to buy gilt-edged stocks which show a rising tendency, and to neglect shares which show an easing tendency. The shrewd investor would now sell giltedged and buy the most promising equity shares. THE UNITED STATES.

Too much can easily be made of the so-called recession in business. It is an alien economic visitation from the United States, but the business people in America are just as anxious as anyone else to see business revive, and it is within their power to cause it to do so. There is a temporary difference of opinion between big business and the President, but that is not beyond settlement. The present conditions may last for the first half of the year, but not longer, and those who arrange their affairs accordingly are likely to come out on the right side. This is a time to pick up bargains in all markets. It is, however, a difficult thing to impress investors and speculators with the follv of clinging to the herd instinct. This is .most marked with investors on the Stock Exchanges. The time to buy is when there is most selling, and the time to sell is when there is mass buying; in other words watch the crowds, but go in the opposite direction. On the Sydney Stock Exchange there appears to be a keen demand for Commonwealth Government stocks, which ordinarily is not a good feature, for it indicates that investors are looking for .safety rather than for a good return. These fixed interest-bearing securities have an appeal for trustees of estates and they are also good holding by companies with funds that they desire to hold in easily realisable securities. THE WOOL MARKET.

The London wool sales have not furnished any spectacular movements. Prices are holding at the level at the opening of the series and there is fairly good business passing. The Australian wool-growers are apparently .dissatisfied with current values, for it is now reported that the Executive Council of the New South Wales -Growers’ Association has asked the Australian Woolgrowers’ Council to confer with the National Council of Wool-Selling Brokers on the decline of wool values. What the New South Wales growers seem to desire is to curtail offerings at the public sales. It is a question whether carrying over large quantities of wool from one season to another is desirable. If the weather conditions are favourable in May, June .and July Australia is likely to have, in the ordinary way, a good clip, and if to this is added a large carry-over stock, the market would he over-loaded with wool and that would cause depression in prices. In .any case, the knowledge that large stocks of wool are in store would prevent users from operating freely, for they would live in constant fear of these held-over stocks coming on the market and making their position precarious, especially if they had made large purchases. Restricting quantities for the market may serve the purposes of rubber producers, but it does not follow that the same procedure would benefit wool growers, t would take an extraordinary demand to lift the season’s clip, plus a heavy carry-over. In the seasons of 1932-33, 1933-34 and 1934-35. wool prices were excerdinglv low and it is a. question whether the heavy carry-over of those years was not, in some measure, responsible for the long depression m wool values. In 1935-36 there was some iirmroveTnent and a good deal of the held-over wool was put on the market .and was a factor in preventing PUces advancing. In the season of 1936-37 there was a strong demand, partly, due to the increasing number of men joining the forces, and partly to Coronation demands. Those special demands have eased off anil prices have eased also It does not seem reasonable to suppose that holding back wool from sale will he of any great help. Users would naturally buy from hand to month until the bogey of huge visible stocks was reduced. RUBBER QUOTA.

The rubber quota for the next quarter has been reduced to 60 per cent., a drop of 15 per cent, on the' last fixed quota, and in view of this prices have advanced. It is quite possible to fix quotas of production, or at least the quantities to be placed on the market for rubber, tea. and some of the base metals, but it is not quite so easy to do so with wool. The wool grows and must be clipped, and storage does not improve it. The application of the quota system raises the prices, but it does not add much to the purchasing power of the producers who in turn-are compelled to buy less’ from abroad. 1 It is a question whether fixing of quotas .of production ib economically sound. It is about the best scheme devised- for some raw materials, and in some respects serves th The U base metal markets keep fairly steady with tin and copper subject to the quota scheme. Current prices are obviously profitable and the demand appears to be well maintained.