From the Farm: Wool matters

By Jonathan Underhill

It has been an odious two years for Wool Services International (WSI) since what it must have thought were rock-solid majority shareholders Woolpak Holdings and Plum Duff, controlled by Allan Hubbard, were placed in receivership.

The company had to try to fend off a takeover attempt via that 64 percent stake, from a group led by arch rival Cavalier. WSI held off raising capital on its own account while keeping Cavalier at bay. If it had been swallowed up, the number of wool scours in New Zealand would have halved and be all in the hands of Cavalier, which had regulatory approval for the deal.

Today the delivery of WSI into Australian hands was completed as wool merchant Lempriere gained acceptances for over 90 percent of the stock. Lempriere gains two state-of-the-art scours processing 40 percent of New Zealand’s coarse wool.

WSI was originally established as a subsidiary of the New Zealand Wool Board in 1991. It may not be missed on the NZAX market, where it was thinly traded. They started trading at about 62 cents on the NZX in May 2004 and last traded this January at 42 cents.

Federated Farmers president Bruce Wills this week called sheep, and more precisely, strong wool “the problem child of New Zealand farming.” His statement was to advertise a report for the Nuffield Farming Scholarship Trust by farmer Sandra Faulkner titled ‘Hello New Zealand Wool – This is The Future Speaking’.

In her 35 page report Faulkner writes, as Wills quotes in his statement: “The New Zealand wool industry is currently weak and fragmented to the point of being dysfunctional.”

“This is not a judgement of the individual businesses involved, but rather a symptom of the commodification of a product along a convoluted supply chain,” she says.

Faulkner’s Nuffield scholarship took her on a global journey following wool exports. She wrote up her conclusions as a five-year strategic plan which includes the resumption of a collective wool levy raising some $10.3 million a year to be spent on R&D, marketing, governance, information transfer, advocacy and market access.

The levy would be set at 3 cents per kilogram of greasy wool, matched by a government contribution. Her vision is “an innovative, cohesive New Zealand wool industry valued for its economic, environmental and social contribution.”

That’s a big leap from where the industry is now: factions, competing commercial interests and often wafer-thin margins have sapped the enthusiasm of wool growers.

After all, farmers voted to dump the old Meat & Wool New Zealand wool levy in 2009, forcing that industry body to trim its budget by more than $6.2 million, dump its work promoting wool and ultimately change its name to Beef + Lamb.

Faulkner charts the decline of wool’s fortunes through the 20th century, including the emergence of synthetic alternatives in the 1960s, deregulation in the 1980s, the loss of Eastern bloc markets in the early 1990s, and in the noughties, a decade of weak prices.

Can wool be rescued as a fibre in the face of cheaper synthetics, which now dominate the global carpet industry and have supplanted it as the fibre of choice for clothing? That’s what the Campaign for Wool (patron Prince of Wales) has set out to achieve – a natural, flame retardant, environmentally sustainable product.

Growers have to be lured back into engagement and their willingness to bet their own money on the future will be tested this month, when Wools of New Zealand’s share offer to growers closes on Feb. 25. The marketing and branding company was forced in December to extend the deadline for the offer, noting at the time that it had attracted less the half the amount sought – below the minimum required of $5 million.

To the outsider there seems to be a bewildering number of wool related bodies with strategies to brand and market coarse wool overseas. Try searching New Zealand Wool on Google and you’ll get 18.5 million results.

As the head fed Bruce Wills notes, Wools of New Zealand isn’t the only company seeking farmer involvement beyond the farm gate. Elders Primary Wool is another.

He urges growers to “unite and take our industry back” because “the incremental losses will only keep mounting if we do nothing.” Growers need to decide whether their product is worth saving.

(BusinessDesk)

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