Wool Woe

Boston, the home of the bean and the cod, is also the home of the U. S. wool market. Until six years ago the Boston wool market was catch-as-catch-can. Buyers went west, bought up raw wool, carried it back to Boston warehouses whence it was sold to mills. In 1931, however, a group of woolmen founded a wool tops futures market under the wing of the New York Cotton Exchange. Lately wool prices have slumped as have most other commodities and last week the wool business, still unused to the complexities of a futures exchange, suddenly began to bleat that the wool market is largely to blame.

Wool tops are wool that has gone through certain processes--sorting, scouring, carding, gilling and combing--which fit it for manufacture into textiles. After combing, short wool fibres are made into certain types of coating, cheviots, shetlands. cashmeres. Long fibres, or wool tops, go into making worsteds, which comprise about half of wool production.* Since wool tops are wool that has been considerably processed, it seems logical to the uninitiated that wool tops should cost more than raw wool. Yet wool tops for future delivery are now selling for from 5-c- to 10-c- a lb. less than raw wool for cash.

This infuriates many a would-be wool buyer who cannot understand the 10-c- more he must pay to get the raw product. Actually, of course, there is no such direct connection between the future price and the spot price. As on other commodity markets, wool dealers trade in futures largely as a hedge to protect their wool inventories, virtually never make actual delivery in the commodity itself.

Spot wool prices last week stood at about 83-c- a Ib., way down from the $1.14 of January. Having piled up excessive inventories as prices rose, woolmen for the past year have been selling ardently, buying cautiously. Both prices and inventories are now down, but so is manufacture of wool goods (currently off about 25%) and therefore all wool buying has been on a hand-to-mouth basis for several months.

Ignoring this obvious reason why present wool sales are few & far between, hard-pressed dealers in Boston and Providence last week suddenly came out flat-footed against the wool tops futures exchange. Not only did they yammer about the 10-c- price differential between wool tops futures and raw wool, but they claimed that wool tops margins are too low, speculation too rife. The Providence Journal announced that a group of dealers this week will ask the Senate Wool Investigating Committee to suspend trading in wool tops futures. While other wool factions called this "ridiculous," Senator Alva Blanchard Adams of Colorado, chairman of the committee, which was appointed in 1935 to look into the marketing of wool after producers protested that they got too low prices in large business centres, opined that it did not have power to suspend trading anyway.

* Total annual world wool production: 3,580,000,000 lbs. World sheep population: 707,100,000.

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