Wool Industry Reform Driven By Growers

19 October 2001

The Wool Exporters’ Council’s ritual attack on Growerco is based on the assumption that the wool industry cannot be reformed, according to one of the new company’s directors.

“We simply don’t agree that this is a good as it gets. Nor do growers,” said Growerco director, Edwyn Kight.

He says the Council’s president and executive manager are out of step with most of the exporters Growerco has spoken to.

“We’ve been very careful not to attack individual exporters because, like growers, they are trapped in a dysfunctional system,” Edwyn Kight said.

“Several large exporters we have spoken to have told us they would love to operate in a more stable, less fragmented market, and are keen to work with anyone who can deliver that.”

Exporters currently have little idea what their supply will be over the next 12 months, Mr Kight said.

“There are immense benefits to everyone in the chain of having assured supplies of wool available. It certainly beats having to stockpile it at great expense to cover forward contracts and buying the rest on the spot market.

“The current procurement system is failing to deliver good returns to anyone along the chain. No-one is making any money from wool.”

Edwyn Kight says the current system also fails to reward growers for quality.

“Growers can put a lot of effort into producing excellent wool, but this is not rewarded by the spot market.”

“Despite Mr Nicholson’s claims to the contrary, growers are already exposed to the risks in exporting. Exporters’ hedging costs are taken off the price they pay growers.

“Growers also lose out from the inefficiencies that exist in an over-serviced procurement chain.

“We have identified several million dollars worth of efficiencies that Growerco can make simply by aggregating the 50,000 tonnes it wants, and sending wool direct to a central store in each island.”

Mr Kight says these assumptions have been independently verified by senior wool industry figures and the potential savings are real.

The key is committed supply of a critical mass of wool.

“That’s the way the dairy industry works. With an assured supply of raw material, Growerco will be able to integrate on-farm production, early stage processing and marketing to deliver the wool manufacturers want, when they want it.

“When we provide manufacturers with that, they will be able to pay growers the quality premiums their wool deserves.”

“By working together, farmers have market strength.

“Growers overwhelmingly supported the McKinsey reforms, which Growerco will deliver,” Mr Kight said.

[ends]

For more information, contact:

Edwyn Kight, tel 025 459 791 or 06 374 3519

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