29 June 2017

‘Cautious’ support as wool industry raise digital trading concerns

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By Annabelle Cleeland

Despite industry views the estimated savings are not what they are cracked up to be, wool exporters and processors are “cautiously” supporting Australian Wool Innovation’s digitalisation of the wool market.

Following meetings by the Australian Council of Wool Exporters and Processors (ACWEP), president Chris Kelly, Australian Merino Exports, said the $38 million lauded in consolidated savings over the first 15 years was “bemusing”.

Mr Kelly said the savings were equivalent to $2.5 million per annum, or $1.50 per bale based on first hand offerings at auction in 2015/16.

“Some of the figures are bemusing,” he said.

“The reality is that this would not be pursued if it was a commercial business accountable to shareholders."

- ACWEP president Chris Kelly

“This is very small for an industry that is expecting to sell wool worth $2.7 billion at auction and to export wool valued at $3 billion this season.  

“We’re not aware of the data behind the $38m figure but expectations would have been for a greater benefit for the industry.”

Earlier this month, AWI revealed the industry group was investing $3.6 million to build and launch a Wool Exchange Portal (WEP).

The reality is that this would not be pursued if it was a commercial business accountable to shareholders - ACWEP president Chris Kelly

The move would see a digital information and trading platform, links to digital selling options, as well as an “eBay style” bulletin board for buying and selling.

Majority of the industry savings were expected to come from the public reporting of service and broker fees.

Mr Kelly said while ACWEP was supportive of the transparent reporting of selling costs, he believed the estimated $210/bale transaction fees were misleading, as they included shearing costs, road transport and sea freight, as well as AWI's 2 per cent wool levy.

“All are important, and should be reduced where possible, but are independent of the method of sale,” he said.

He said with wool currently valued at just under $15,000 a tonne clean - the highest value of all major Australian agricultural production - it was imperative selling changes should retain the same level of financial security that currently applies.

“I think any remote access to the wool market from overseas is concerning because it brings up payment problems,” Mr Kelly said.

“(Exporters) are currently regimented with payments… that would be exposed in an electronic world with overseas bidding.

“Overseas clients we consider risky, we give them a wide berth because of financing issues. They would love an access point to the market but I’d imagine they would bring their bad habits with them. They’re a minority but they are well known.”  

He said talk around the auction floor had questioned whether the trading element of the WEP would succeed.

“There is some support for what AWI have mooted, not strong support, brokers are more concerned,” Mr Kelly said.

“It is cautious support at best.

“In some format the WEP will survive, but there is great concern about the trading element.”

National Council of Wool Selling Brokers of Australia declined to comment on the WEP, saying it was a commercial decision to be made by individual businesses.

The portal is expected to cost $860,000 to operate annually and would be managed by a not-for-profit offshoot company of AWI.

Following the announcement, AWI chief executive Stuart McCullough said the investment was “good value”, in light of the estimated $300m price tag to sell the national clip annually. 

An AWI spokesperson said the company welcomed the ongoing support and open dialogue with ACWEP.

“Broad industry consultation has been a priority throughout the entire Wool Selling Systems Review and WEP Working Group phases, and the WEP Steering Committee will continue this approach by taking onboard the concerns of all sectors of the industry as we move to the discovery phase,” the spokesperson said.

“The complex and hidden nature of transaction fees continue to be a quandary for many, particularly woolgrowers who ultimately are burdened with these costs.

“The WEP will provide a level of transparency that will assist growers to understand, compare and make informed choices.”

ACWEP president Chris Kelly believes the Wool Exchange Portal revealed
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