19 October 2001

Putting some bounce into wool

What to do about wool? Its something theyve been tackling

in New Zealand in a big way in the last few months,

explains NZ correspondent Hugh Stringleman

THE once-dominant New Zealand strong (crossbred) wool industry is looking for answers to marketing and organisational problems, most of its own making.

Long inquiries into the structure of the industry and its promotional activities have consumed millions of dollars and not yet provided a solution which works and which growers will endorse wholeheartedly.

Many wool growers now resent the cost of all the talking, planning and promotion of the fibre on their behalf. They want to see the remaining $110m (£30m) within industry reserves returned to them and the Wool Board abolished.

"For years the Wool Board has made investment decisions on behalf of growers – growers are now questioning what they have got to show for it. They are not convinced the Wool Board will make the best investment decisions," says Murray Taggart, chairman of Meat and Fibre Producers, a division of Federated Farmers.

Declining wool prices and a crisis of confidence in the appropriateness and cost of the Wool Boards activities, funded at that time with a 5% levy on wool sales, resulted in growers almost unanimously in late 1999 voting for the McKinsey inquiry.

At a cost of £1m, this big international consultancy came up with 10 major recommendations. That was May last year.

Chief among them were plans for three big "fibre firms" which would control each of the wool sectors, divided into micron ranges, from supply through to marketing. They would be launched with start-up capital from the growers reserves and finally give New Zealand farmers control over the fortunes of their fibre.

The most dominant was intended to be StrongWools NZ, covering the 80% of New Zealands wool production which falls into this range (32 microns and stronger). Here New Zealand has a worldwide reputation for clean, white and well-prepared wool, suitable for all interior textiles.

Now more than a year after McKinsey signed off, only one reform recommendation has been implemented, with three or four others nearing agreement, but still short of action.

The fine wool sector, consisting of 700 Merino farmers and less than 10% of total New Zealand wool production, reached an agreement to combine their supplies and work to produce what spinners and cloth makers want and to extract maximum value from those specialised markets.

The mid-micron growers (23 to 32 microns) will probably attempt something similar with their 10% of supply, aimed at the voracious Chinese market for hand-knitting yarns.

But the strong wool producers are still in disarray. Numbering more than 20,000 and farming a broad range of Romney and Romney-cross dual-purpose sheep breeds, these farmers are enjoying some of the best sheep meat, beef and by-product prices for 20 years or more.

For them the whole business of improving wool production -getting it off the sheeps back, classed, baled, transported and sold – has become an unrewarding chore.

With lambs prices at record highs, dual-purpose breed farmers are swinging over to maximum lamb production, raising the popularity of terminal sire breeds such as Suffolk, Southdown, Poll Dorset and Texel.

Against this background of discontent one of New Zealands most experienced commodity marketers, Richard Janes, was asked to find a workable business plan for StrongWools NZ.

The former London-based International Wool Secretariat executive wanted to link supply contracts by farmers with exclusive use by spinners and manufacturers of the Fernmark carpet branding programme, developed at great expense since New Zealand pulled out of IWS and the Woolmark brand nearly 10 years ago.

This would have meant by-passing the auction system and disrupting historical trading agreements, so not surprisingly many New Zealand wool exporters and European crossbred (strong) wool users were against the Janes plan.

In the event, the reform plan was stillborn, as Janes could not convince a watchdog committee back in New Zealand that he could get sufficient commitment anywhere along the pipeline to risk tens of millions of dollars of reserves establishing a new and radical organisation.

John Grainger, another former IWS executive, was then given permission to try a more conciliatory proposal, which has met with more favour among overseas users.

Grainger has teamed up with the Wool Research Organisation of New Zealand to offer franchises of strong wool processing technology, promotional assistance and brands without the necessity to buy wool from contracted supplies.

Tentatively named Wool Interiors, this voluntary scheme does not by-pass the auction system and exporters and will continue to work with the best of carpet and rug manufacturers in Europe, the US, Australia and New Zealand.

Details of the Wool Interiors proposal, plus various R&D plans concentrating mainly on biotechnology, are being explained to growers and, if approved, the reformed New Zealand strong wool industry structure will begin operating from Jan 1, 2002. Evolution, not revolution, will be the path for the New Zealand wool industry.

For years the Wool Board has made investment decisions on behalf of growers – growers are now questioning what they have got to

show for it

For them the

whole business of improving wool production -getting it off the sheeps back, classed, baled, transported and sold

– has become an unrewarding chore

Above and left: NZ farmer are getting good prices for lambs but wool can be an unrewarding chore.