18 February 2016

Wool review ​backlash

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By Annabelle Beale - The Land

AUSTRALIA’S top exporters of wool fear the country’s trade reputation is on the line if Australian Wool Innovation (AWI) adopts recommendations to overhaul the auction system.

Techwool Trading managing director Rod Franklyn said some of Australia’s largest wool trade partners, including China, India and Europe, had raised concerns about AWI’s Wool Selling System Review (WSSR) final report made public this month.

Techwool Trading exports more than 320,000 bales annually, turning over $450 million.

The major areas of exporter contention are around the panel’s push for wool sales by description, direct selling on farm and electronic selling.

The panel accused the appraisal of wool at auction as a “gold plated” and “Rolls Royce” system involving objective testing, physical display of the sample and multiple inspections.

A number of the WSSR proposed selling alternatives remove the need for mandatory sample inspection.

“Our customers are dead against sale by description,” Mr Franklyn said.

“We’ve had several cases in the past of misdescribed lots and fraudulent behaviour with sample swapping where we have had significant claims from customers about the quality of wool and cases of mixed bales.

“If sale by description was implemented, the amount of these claims would be magnified to a vast amount.”

The report said objectively measured characteristics of micron, yield, length, strength and vegetable matter were most important for determining price.

However, the panel’s suggestion that some types of wool could be sold without appraisal or price penalty was strongly objected to by several exporters who questioned who would foot the product guarantee bill if lots were wrongly described.

“At the end of the day it is the exporter who guarantees a delivery financially, and most importantly for quality,” Mr Franklyn said.

“Someone has to value that wool and to me the final person having the say has to be the exporter.

“This is not criticising brokers, but they know nothing about customers and customs’ requirements.”

Australian Merino Exports director James Thomson said demand would be impacted.

“We’ve received calls from customers overseas who have said if they can’t get our product guaranteed then they’ll look to increase their purchases from other origins,” Mr Thomson said.

“In the last five years, our company has grown when other corporate companies are getting out.

“The fast growing area of our business has been specialised types into the Japanese and European markets but that would be jeopardised with the proposals put forward in the review.”

Resistance to the Wool Exchange Portal (WEP), the report’s main recommendation, has been widely criticised by exporters because of its perceived “fragmentation” of the supply and availability of wool. The WEP proposal is a website which has alternative live selling and buying options.

“All the alternate selling choices already exist and the uptake of such selling choices is increasing in a commercial way - statutory intervention is not required to force the speed of this change,” Mr Thomson said.

“The auction system has many great strengths, the most important of which for woolgrowers is the absolute transparency and security that only the auction system offers.

“No alternate system can assure growers to the same extent that they are receiving maximum competition for their wool.”

Modiano Australia director Lou Morsch said together with associated company G Modiano Ltd - owner and operator of Europe’s largest early stage processing plant - would re-evaluate the level of buying in Australia if there was not visual appraisals of wool in their targeted types from 14 to 38 micron.

Modiano Australia exports an average 90,000 bales annually, with turnover of $100m.

While Modiano supported the review, Mr Morsch said the open cry auction was the most efficient and transparent system to exchange ownership and the advent of a wool portal did not reveal a benefit to growers’ returns.

“Taking away the sample is something we won’t entertain,” he said.

"Our business relies on buying wool through visual assessment – without the ability to inspect and assess samples we feel there are a number of issues regarding integrity, and our ability to assess the unique properties of wool would be diminished.

“In our opinion the WSSR poses more questions than answers and that revolves around AWI are trying to achieve.”

Wool Producers Australia chief executive Jo Hall said grower support for the WSSR recommendations, including the WEP, was dependent on majority of industry support.

“We don’t want to see the utilisation of significant grower levies if it won’t be used by the trade,” Ms Hall said.

“We want some assurance it will be utilised by other supply chain partners because there is the potential that it would be established and exporters won’t use it.”

“The review raised a number of interesting points, however the sole focus of the Wool Exchange Portal as the answer to problems raised is concerning given the lack of detail as to what the WEP actually is.”

The National Council of Wool Selling Brokers of Australia’s second submission to the WSSR supported consideration of offering wool without sample for certain fairly uniform wool types.

The story Wool review backlash first appeared on Farm Online.

 

Australian Merino Exports managing director James Thomson said without a wool sample to view and feel, AME was only able to offer a basic price.
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