Australian Wool Innovation has announced a complete review of the wool selling system, to increase the “competitive tension” and transparency around the sale of wool, while trying to reduce the cost of selling wool.
AWI chief executive officer Stuart McCullough said after the AWI’s AGM in Sydney last week that the research, development and marketing body was keen to look at parts of the supply chain.
“There have been plenty of projects in the past that want to fix everything in the supply chain, but we think in particular at the transaction between the first owner, the grower, and second owner, the exporter, it’s worth having a look … at that transaction only.
“We think there is opportunity to have some competition creation and the third thing of course is transparency – what’s happening there and who is getting charged for it, where the cost is being levied,” he said.
“I want to demonstrate to woolgrowers not only where the costs are being levied and who is paying for them.
“Often it is the case that it is woolgrowers that are paying for them.”
Woolgrowers to be asked for review submissions
Mr McCullough said the review has been discussed by its industry consultative committee, but more details would be included in AWI’s December edition of Beyond the Bale.
“Of course will be asking them for submissions, we are really keen to hear from them as well.”
A panel has been appointed to conduct the review includes Graham Samuels, Bernie Wonder, Will Wilson, James Lillie and Colin Bell. As part of the review, woolgrowers in coming months will be invited to submit their own views on the exchange of wool through the selling system.
Mr McCullough said a review issues paper would be released on December 12 that would the “prompt, the jab in the ribs to the wool industry” to provide submissions and feedback to the review panel.
Mr McCullough said the intent of the review was not to in any way potentially control or manage the supply of wool to the market as was done with the failed reserve price scheme.
“Those days are well and truly gone; we are an R&D body, we’re not a wool corporation-type body.
“We are doing the research on a particular transaction between the first and the second owner and seeing whether we can reduce the costs and create some competition.”
AWGA sees little benefit in selling systems review
However, Australian Wool Growers Association director Martin Oppenheimer did not believe the selling system review would achieve much and he did not believe the review was within AWI’s charter.
“It seems to me that it is driven by the fact that AWI after spending hundreds of millions of dollars over the last four to five years, has failed.
“It is failing to manipulate demand, so it is trying to manipulate supply, that’s clearly not going to help the industry and woolgrowers won’t allow it to happen,” he said.
“AWI’s role is research and marketing and if we are talking about the supply of wool as it comes onto the market, that’s for the industry to deal with.”
AWI marketing programs defended
At the AWI AGM last Friday, Mr McCullough defended AWI’s marketing activities and the planned drawdown in reserves, with a $14 million reduction in the last 12 months.
He said there had been a 239 cent gain in the benchmark Eastern Market Indicator (EMI) since AWI marketing was relaunched in October 2010. This compared with the wool market gain of 214 cents across the previous 20 years from 1990-2010.
Despite this lift, Mr McCullough acknowledged the benchmark of profitability for many wool growers was an EMI of 1100 given the climate of increased costs on farm.
AWGA Chairman Robert McBride released a report card on AWI last week, supporting AWI expenditure on the HRH Campaign for Wool, in sports and outdoor wear, and into wild dog control research and wool’s eco-credentials. AWGA said AWI should discontinue funding of the N0o Finer Feeling campaign and be more proactive in protecting the reputation and image of Australian wool.