THE WOOL SLUMP.

Taihape Daily Times, Volume XII, Issue 3632, 19 November 1920, Page 4

THE WOOL SLUMP.

THE QUESTION OF ADVANCE, EXTENT OF GOVERNMENT GUARANTEE. POSITION STILL INDEFINITE. The decline in the price of woo! at the Christchurch sales on Monday, following the unfavourable . repo its from London, has given many producers an added interest in tie prob-

lem of wool finance. The farmers are being advised to hold £hoi- wool leot by putting it Into >n a .‘o ly o-<r-stocked market .hev sIo tU &; ceiuuatc the existing trouble and most of them realise that the advice is good. But very many of the farmers cannot wait a year or two years for their wool money. They must secure advances on the hales n ey have put into the stores, and cucy arc wa>tmg with some anxiety to learn what the basis of those advances will be. A Dominion reporter who made inquiries on the subject in commercial and banking circles gathered that the .situation is still very, uncertain. Bankor..l and sfatinn aeenbs. as

well as farmers, are watching developments, and they are not prepared yet to speak at all confidently about arrangements that must depend upon circumstances. It is true that the Government has taken power to guarantee advances made 'by the banks to produces, , but the terms of this guarantee have not been defined. The clause of the Finance Act dealing with the subject reads as follows:

Where any bank carrying on business in New Zealand has, with the approval of and subject to conditions imposed by the Minister of Finance, advanced any moneys to personjs .engaged in New Zealand •in the production of wool, meat*, dairy produce, or other primary products, on the security of such products, the Minister of Finance may from time to time enter into agreements with such bank to guarantee to the bank the repayment of such advances and of the interest and other charges in respect. thereof. The Minister of Finance (Mr Massey) has stated definitely that while the Government is prepared to supporr the producers, it is not going to risk the loss of any of the public money. The banks, with or without the guarantee, will not make advances beyond a maximum believed by them ' be well' within the actual market value of the wool. The question to be determined, then, is what is the actual mairket, value, having regard to all the factors. It is obvious, OT course, that the company or banK making the* advance will be guided also by The general financial status of the borrower. One farmer may The in a position to secure better terms than his neighbour can obtain. The man with the big mortgage and the small equity will be iu a disadvart

ageous position, and at the samp time he will be the man least able to bold his own wool for any length of time without assistance. If the Government guarantee is required, it will be chiefly for this class of producer. The conditions of the. Government guarantee will not be defined until the needs of tins’ situation become more certain than .they are at the present time. Neither the November London sales nor this week’s Christchurch sale can bo regarded as having fixed wool values. 9 The real key to the situation Is held by the British Government, which owns the accumulated stocks of Australasian wool, amounting at

the end of September to some 2,635,000 bales. The Government has asked the Director-General of Raw Mater-

ia l fo continue the policy of holding j wool firmly and releasing such quan- , titles as can he absorbed by the ma*- ; ket without causing a ruinous fall In prices. If the accumulated wool fl withheld in this fashion, and if facilities are provided for getting some pang of the new clip on to the market, the men who have the handling of the wool at this end are disposed to be--IWe tKat any really serious trouble can be averted. It was suggested to the reporter that the Imperial authorities owed the New Zealand producers some consideration since Hie situation that has arisen is due largely to the policy followed in London during the war of selling limited quantities of wool at very high prices, ana allowing stocks to accumulate. Tire same policy was adopted in regard to meat, with consequences well known to the New Zealand farmers. If the accumulated wood should now be placed upon the market quickly, a moss: serious situation undoubtedly wouin be created. The Government w!?5 try to get definite assurances on fhri> point before declaring tho ey tf-n* *o j which the guarantee will be carrlec. I The policy of the banks in ‘the moan'time must bo guided by circumstan-