First wool battle lost but campaign not over

20/02/2011

The announcement that Wool Partners Co-operative was unable to get half the national wool clip signed up wasn’t unexpected.

It was always a big ask and the continued extensions to closing day showed the co-op was struggling to get the support it needed.

Opposition from other players, which included misinformation didn’t help, and rising prices might have persuaded some that the co-op wasn’t needed.

However, the loss of this battle doesn’t mean the campaign is over.

Bruce Wills, Federated Farmers Meat & Fibre spokesman said the co-op is down but not out.

“To be successful, truly successful, a cooperative has to be built from the bottom up.  What I take heart from is that despite some of the worst years for profitability, so many had shared up.

“Yet wool growers have now spoken and the requirements of the WPC prospectus have not been met so we need to move on.

“Federated Farmers is determined to make certain that we don’t look back on this day as an opportunity wasted. 

It’s why Federated Farmers is keen to talk with Wool Partners International and all industry players about a grower owned model. I’m still personally convinced that together in a cooperative we can make things happen for our industry. 

“Consolidation and unity is important to wool growers as is much closer involvement in the selling of our fibre.

“There have been many reports into wool but most conclude that farmers should remain owners of their fibre until at least the end of first stage processing.  There’s something fundamental about that.

“WPC put up an option that they felt might meet this requirement and got the largest voluntary capital raising the wool industry has ever seen, with 40 million kilograms committed.

“That tells me a sizeable minority of wool growers want a cooperative. They put their money where their mouth was.

“Doing nothing isn’t an option for farmers or the meat and wool industry.  Wool is integral to the sheep industry’s long term prosperity.

Although the meat industry has got most of the blame for poor returns in recent years, low prices for wool, pelts, tallow and other by-prooducts was also responsible.

A shortage of sheep and rising demand for wool is giving much better prices this season but unless there are some fundamental changes to the way wool is marketed we can’t rely on them holding up.

WPC chair Jeff Grant offers some hope for those who want to see some changes:

WPC planned to raise $65 million to buy assets and use the commitment from growers to supply half the country’s wool clip, to have a greater influence on the market.

They planned to secure contracts with carpet retailers in Europe, United Kingdom and the United States and use brands linked to New Zealand’s and wool’s natural, sustainable environment and production systems to command premium prices and grow market share.

At present, most coarse or strong wool is sold at auction or directly to merchants with little or no use of those attributes, which Mr Grant said were increasingly being demanded by discerning customers.

But efforts to change the way strong wool is sold may not have died out, with backers of WPC saying there was sufficient interest from farmers to see if an alternative structure can be salvaged.

WPC had some good ideas to add value to wool and ensure farmers got more for their clip.

The directors won’t be able to do all they’d planned with a lesser amount of wool but I hope they have a Plan B which enables those farmers who are prepared to commit to them to do so and share the better returns.


Good news for wool in spite of word war

14/01/2011

A war of words has broken out between the Wool Exporters Council and Wool Partners Co-operative.

WEC says the wool co-op will never get over the line and reckons the co-op isn’t answering its questions.

WPC in return says that wool merchants and exporters aligned with the WEC are trying to undermine efforts to float the co-op.

While that’s going on there has been good news for the industry.

Wool Partners has made a second premium offer to growers who can supply high quality wool required by two British carpet manufacturers.

America’s largest carpet manufacturer has joined Wools of New Zealand’s Clean Air Certified programme.

Wool Partners International Chief Executive Officer Iain Abercrombie says Karastan’s certification and adoption of the programme is a further endorsement of the work Wools of New Zealand is undertaking to position New Zealand wool as the premier natural carpet fibre, produced in ethically sustainable manner.

 “This is further verification of the programmes we have been discussing with New Zealand growers to gain the recognition and the true value of the high quality wools they produce.”

 “It is intensive marketing backed by technical expertise developed by Wools of New Zealand, to delight consumers with the sheer luxury of naturally produced New Zealand wool.”

Programmes like this also require research and that’s been given a boost by the government.

Minister of Agriculture David Carter and Minister of Research, Science and Technology Wayne Mapp announced the investment of $17.25 million over five years in a wool research consortium tasked with lifting the economic return of the wool industry.

“The success of the strong wool sector hinges on developing new uses and markets for the industry – and with the growers themselves realising its full potential,” says Mr Carter.

“We are committed to growing New Zealand’s export earnings from wool fibre, and from value-added wool products developed through market-led research programmes,” Dr Mapp says.

The consortium participants are the Wool Research Organisation of New Zealand Inc (WRInc), and other New Zealand industry stakeholders. Key providers will include AgResearch and New Zealand universities. . .

“The wool industry is collaborating across the value chain to address key research questions, and the Government is supporting them,” says Dr Mapp.

Mr Carter says increased research and development for the wool sector was one of the key recommendations of his Wool Taskforce, which presented its report last year.

“The Wool Research Organisation’s constructive engagement through the Wool Unity Group has shown what can be achieved by better cohesion and co-operation within the wool industry,” Mr Carter says.

Collaboration and co-operation are working to good effect for research. It would also help with the marketing and wool exporters would be better employed concentrating on work which would maximise returns for growers than bickering with WPC which is trying to do that.


Wool part of the solution to falling sheep numbers

26/11/2010

Beef + Lamb New Zealand ‘s announcement that the lamb drop was more than 10% down on last year’s wasn’t unexpected.

A cold, wet spring took its toll, not only in Southland and South Otago where it snowed in late September, but in the North Island too.

The Beef + Lamb New Zealand (B+LNZ) Economic Service’s annual Lamb Crop Survey released today shows the number of lambs tailed was 25.11million head – 2. 8 million less than last spring – and the largest between – season percentage decrease seen in 21 years.

B+LNZ Economic Service Director, Rob Davison says both islands were affected by the cold and wet weather patterns that saw heavy snow fall to sea level in Southland during late September.

“North Island lamb numbers were back 9.5 per cent, while South Island numbers were back by 10.4 per cent.  Any regions where lambing was in full swing in late September were affected.

“Overall, the ewe lambing percentage across the country was 109.6 per cent. That’s 11.9 percentage points lower than last season’s 121.5 per cent – the lowest percentage we’ve seen since the spring of 1995.  While scanning results indicated lambing would be back slightly, it was the prolonged, cold wet weather during spring that was ultimately responsible.”

Lambs from hoggets were up 6.2 per cent on last season – this was partly because hoggets generally lamb later in spring and so largely avoided the adverse weather.  Hogget lambs this spring made up 4.0 per cent of the total lamb crop.

However, Mr Davison says continuing cooler weather, a lack of sunshine and consequent low pasture growth rates mean across the country, lambs are an average of two or three weeks behind where they would normally be at this time.  As a result, early drafts are down in both numbers and average weights.

 This will lead to a decrease in exports, although not by the same percentage.

“We estimate lambs for export will fall 1.4 million (-6.8%) on last season, to 19.5 million.  The reason for the lesser decline than the 2.8 million fall in the lamb crop, is that we predict fewer replacement lambs will be retained this season compared with last season’s high retention.  This season the trade-off will be to keep fewer replacements to generate cash flow.

“With fewer lambs to finish, average weights are expected to be up 1 per cent on last year to 17.8 kg which would make this the highest on record.  The prediction is that farmers will draft as many lambs as possible early to take advantage of the new season lamb schedule prices, then hold off until later in the season, opting to produce heavier weights to maximise per head prices – while at the same time hoping for a decrease in the New Zealand dollar by later in the season.

“Last season’s mid-November lambs were realising $5 to $5.20 per kilogram. This season, we’re ahead of those levels, around $6.10 to $6.30 per kilogram.”

Mr Davison says an active store market has already appeared, driven partly by fewer lamb numbers, but also concerns that the current La Nina weather pattern could deliver a dry summer across the country.

Farmers, and their financiers, will welcome the improved prices but the decreased numbers of lambs will put more pressure on the meat companies which were already regarded as having too much killing capacity.

However, falling numbers provide an insecure foundation  for higher prices. A stronger base requires better prices not just for meat but for wool and other by-products as well.

Wool Partners Co-operative  is offering an opportunity to for better returns from fibre, but it requires 50% of the wool clip to get under way. If it doesn’t get enough support the first realistic opporunity in years for improved returns from wool will be lost and that will be a blow to not only the wool industry but the meat industry too.

The full Lamb Crop 2010 survey is here.


Wool co-op the way to go

10/11/2010

Wool is a natural, renewable, sustainably produced product.

It ought to be earning a premium because of that but strong wool is worth only about $3.50 to $4 a kilo, greasy. That’s less than growers get in Britain now and about a quarter the price New Zealand farmers received 20 years ago.

Several factors are responsible for this, among  which is poor marketing, but if the capital raising attempt by Wool Partners Co-operative is successful then that will change.

WPC chair Jeff Grant made a convincing case when he spoke to a farmer meeting in North Otago yesterday – one of nearly dozens being held throughout the country to convince farmers to back its plan to control at least 50% of the national wool clip.

The company aims:

To be innovative in the way wool is marketed.
For wool prices at farm to become stronger the price of wool products in the market must be strong. Wool Partners will be active in supporting its customers in meeting the needs of consumers. 

To develop an integrated supply chain to market.
In other words to have within the company the capability to take wool from farm to market in the most efficient way possible.

To consolidate as much of the New Zealand clip as possible.
The economies of scale in doing this are significant and it means that an improved and co-ordinated offer can be made to the market.

To create a grower controlled company.
Wool Partners will be owned by growers through Wool Grower Holdings and will work to improve the value of wool at market and at farm.

Farmers I spoke to after the meeting were prepared to support the initiative.

The least enthusiastic reckoned WPC couldn’t do worse than what’s happening now.

The optimists said WPC was providing growers with an opportunity to turn around more than 20 years of dwindling returns and they were going to seize it.


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