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New wool cooperative integrates growers

New wool cooperative integrates growers with end users

The new national wool marketing cooperative, Primary Wool Cooperative Ltd, will take a new approach to marketing wool and will closely integrate wool growers with end users, says managing director Brian Murray.

Farmer-owned Primary Wool Cooperative Ltd is being formed through the merger of two of New Zealand's largest cooperative wool entities, the North Island-based East Coast Wool Cooperative Ltd and the wool division of Combined Rural Traders (CRT Primary Wools). It will be New Zealand's biggest wool cooperative and will have a first year turnover of more than $50 million.

Woolgrowers are being encouraged to invest in the new cooperative company which will return its profits back to growers, meaning that earnings will be retained within the wool producing sector instead of being lost to commercial investors.

Mr Murray says Primary Wool Cooperative Ltd is the solution to the industry's search for a wool entity closely integrated with end users.

East Coast Wools has for many years had a close association with Feltex Carpets and is that company's largest supplier in the North Island. It supplies the company with the same volumes and types of wool on a regular monthly basis throughout the year. Part of that is under a contract called Farm-to-Yarn which is a quality focus programme directly linking growers back-to-back with an end-user first stage processor. Wool supplied under the Farm-to-Yarn programme is channelled through an autonomous company to ensure the transparency of transactions and so benefits can be clearly seen by growers.

Mr Murray says there is huge potential to further develop this back-to-back programme in offshore markets, and as part of its commitment to the programme, Primary Wool Cooperative Ltd has aligned itself closely with WRONZ to participate in joint research and development programmes.

"We have given a commitment to participate in research and development programmes with WRONZ to identify products, and there are two that we have identified so far that we are prepared to put money into," he says. "We're looking at products that will give Primary Wool Cooperative Ltd a marketing edge on an exclusive basis that will in the long term benefit our shareholders."

Mr Murray sees a radically different future for wool than the uses we have become used to, way beyond the textile and apparel trade. He believes the future will see wool being processed for its protein value rather than its fibre value, and he says there are plenty of exciting new opportunities already in existence from this work.

"We've heard a lot about reform in the wool industry, but the reform that is needed won't come about solely in the form of marketing change because we're too far down the chain to have any major impact on that," he says. "The needed reform won't come about by a big bang, but will come by forming new relationships, built on the existing wool pipeline and getting the grower closer to the end user.

"There has been a lot of hype and a lot of ideas over the last few years as to how the industry is going to be reformed, but I'm convinced that it's not going to be reformed in that way - reform is going to come through diverse use of wool and that's what we're prepared to get into.

"We're looking at how we can market wool in a more diverse manner with the objective of replacing the trading commodity image with a new image as a valuable raw material with a wide range of applications in processing and production. If we can get that concept in place, then we're in a position to further work on developing direct relationships between growers and manufacturers."

Mr Murray is concerned that because of the image wool now has, it is being seen by some growers as a byproduct.

"We've got to change that image, and that's not going to be easy," he says. "With the rise in meat prices, wool has become a bit of a byproduct which is a problem, because if growers treat it that way, they then don't put the effort into growing it, the quality deteriorates, manufacturers start complaining, and the whole cycle starts to spiral downwards.

"The industry has to tidy itself up and it has to reform. Sheep numbers are reducing, so you don't have to be a scientist to work out that there has to be rationalisation within the industry or there will be casualties. What we're trying to do is break away from the status quo and move more into a cost plus business, and share the efficiencies with growers."

With the creation of Primary Wool Cooperative Ltd, Mr Murray says the industry has the model that people have been attempting to get off the ground over recent years.

"The whole concept of McKinsey and other proposals such as Strong Wools, GrowerCo and One Wools, was to get ownership and control into the hands of the grower," he says. "We don't have to go out and build another empire to do it, because we have the foundations here, and with this merger we're now broadly enough spread to gather growers in.

"That will enable us to become an entity that is profit driven for the benefit of the industry itself, and not for the sake of commercial investors."

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