A united front could warm the wool industry

JON MORGAN
Last updated 11:28 11/07/2013
Wool
TOUGH MARKET: Wool is struggling to compete with synthetics and prices are abysmally low.

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OPINION: They say it's going to be a mild winter now that the Antarctic gales have petered out. But I'm not throwing off my winter woollies just yet.

And they are wool. The blankets on my bed, the rugs on my floor, the clothes on my back (and front). I couldn't look sheep farmers in the eye if they weren't.

But a surprising number of sheep farmers are not wearing wool. Quite often their outer clothing is made from a synthetic fibre.

Which makes me wonder about their carpets . . .

Not all farmers are like this, but we are seeing the passing of an era, of a time when the people who grew wool had an emotional tie to it, when producing the world's whitest, longest, springiest fleeces was something to be proud of.

And something to be well-paid for. Let's not forget that.

Now, wool is struggling to compete with synthetics in carpets and textiles, and prices are abysmally low.

No wonder sheep farmers aren't paying as much attention to producing top-quality wool as they used to. Or putting it on their beds, floor and backs.

The reasons for wool's fall continue to be argued. The current view is that most ground was lost when farmers stopped paying for promotion in the 2001 reforms.

But they had good reason for taking this stand after seeing the Wool Board throw away millions in a crazy market-support scheme in the 1980s which alienated carpet manufacturers.

With the demise of the Wool Board, growers have been left to their own devices.

A variety of marketing schemes have been floated, some with more success than others.

The latest is Wools of New Zealand, a farmer-owned marketing company that recently raised $5 million to put into selling its branded wool to carpet makers.

Federated Farmers and others urged farmers to back the company, saying it was their last chance to secure their future, but $5m is a piddling sum and it is to be hoped the company will grow as it chalks up marketing successes.

However, all the talk about last chances was wide of the mark.

All along, through the last 10 years of farmers' struggles to take a stake in the wool business, and before, they have had a co- operative they could buy into. And it beats me why they haven't.

It is the Primary Wool Co-op, which began life back in 1974 as East Coast Wool Co-op, formed to give farmers a shareholding in a wool-spinning mill in Dannevirke. Bay de Lautour, one of those behind the plan, is now 80 and still the co-op's driving force.

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The co-op grew, started a scour, bought a trucking firm, established a brokering arm and developed close ties with carpetmaker Feltex. In 2002, it became a national co-operative when it bought the wool division of South Island co-op Combined Rural Traders and was renamed Primary Wool.

However, the co-op floundered as Feltex's influence died and attempts to market wool overseas struggled. It was earning a small premium for supplying high- quality wool to manufacturers' specifications, but this wasn't enough. It needed to back that with a strong marketing drive aimed at consumers - a multimillion-dollar exercise, too rich for its members.

Then the Australian wool giant, Elders, the world's biggest handler of wool, re-entered the New Zealand market. In 2005, Primary Wool formed a 50:50 joint venture with Elders Rural Holdings, itself a 50:50 partnership of Elders Australia and Kiwi investors, to develop a consumer brand.

That brand is JustShorn, which was launched into 400 retail stores in the United States earlier this year after the Elders Primary Wools partnership spent $6m on it. Add to this a commitment to the brand from carpet manufacturers and retailers and it could be a $15m investment.

But, amazingly, the co-op has only 1000 members.

Those members have done pretty well, receiving $1.1m in rebates and dividends in the last three years. Add in subsidised woolpacks and it comes to a 49 per cent return on the 20c a kilogram price tag of joining the co-op.

So, why aren't more farmers flocking to join? It's hard to be sure, but perhaps farmers see the name and don't realise it has a big Kiwi stake.

There could also be concern over the de Lautour family having a big shareholding. But without Bay de Lautour financing it through its hard times the co-op wouldn't have survived. And his shares are non-voting, non- dividend preference shares which are being reduced.

Clearly, the co-op needs to spend some of the money that is now starting to flow on lifting its profile. Perhaps a name change is needed.

I can see complementary aspects to the co-op and Wools of NZ and it would make sense for them to work closer together.

The co-op has its investment in broking, which is wool handling, testing, sale preparation and warehousing. Both companies have their own carpet wool marketing programmes but the market is so big there is plenty of room for them both.

Then, perhaps, we might see wool starting to climb out of the doldrums it has languished in for decades and back into farmers' good books. And onto their floors, beds and backs (and fronts).

- The Dominion Post

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