INDEPENDENT Australian wool brokers have increased payment prompt and free storage periods to help exporters cope with the difficult logistics and industry finance environment.
However, Australia’s biggest brokers – Elders, Nutrien and AWN – are yet to release any details of likely concessions, as the auction market this week rebounded with stronger competition after a significant US3.39 cent drop in the Australian dollar exchange rate.
Sheep Central last week reported that global shipping delays and cost increases, COVID lockdowns in China, a bale dumping bottleneck plus documentation and finance issues were combining to limit the buying activity of exporters.
Exporters still under pressure – Woods
President of the National Council of Wool Selling Brokers of Australia and Jemalong Wool managing director Rowan Woods said despite the lift in the market he still believed the exporters were under pressure.
“We can’t shift wool out of stores.
“We are bulging with wool in our wool stores because buyers are leaving it in there and that’s creating issues for us because we’ve got to find more storage.”
Mr Woods said it is encouraging that some brokers have been able to offer more favourable payment and storage conditions for exporters.
“We understand that not everyone is going to be able to do that, but anyone who can, I’m sure it is greatly appreciated by the trade.”
Mr Woods said the industry’s biggest enemy at the moment is big offerings.
“We can’t do much about the shipping issue, that’s a longer term fix.
“The only thing we have got some sort of control over is how much wool we put up for sale, but we can’t interfere with the natural market forces.”
Mr Woods said the warnings signals are starting to appear from cash-strapped exporters and traders who cannot refinance until wool is shipped.
“They are really starting to hurt and the signals are that this could get a lot worse before it gets better and exporters will simply have to sit out of the market because they won’t have the funding to be able to buy.
“It will have an impact on price, make no mistake.”
Mr Woods said extending prompt periods was an individual broker decision.
“But any who are listening to the export trade and have any empathy with them at all will be seriously considering those options.
“Without those exporters we haven’t got a market, so we need to keep as many of those exporters in business and buying as we can,” he said.
Independent brokers make prompt and storage changes
After members of the Inland Wool Brokers Association met with Australian Council of Wool Exporters and Processors Josh Lamb earlier this week, IWBA president Mark Bazeley said brokers would make individual decisions on whether to extend prompt and storage periods this season and then reassess the situation.
He said the current problem has been developing for the last two years.
“Cashflow has been an issue for quite some time.”
“The consensus was that as individuals we will be trying as best we can to help them (exporters) because it is in our interests.
“This is not a short-term thing, this is a scenario that is going to go on for quite some time,” he said.
“The fact that Shanghai has been locked down has really made it enormously difficult and there is not a lot of joy coming from the shipping companies.”
Last Friday, allied wool broking businesses, Macdonald & Co and Carmichael & Co, decided from this week to extend payment prompts by one week and double the free storage period to two weeks, to be re-evaluated by the end of the season. Principal Don Macdonald said the move had been well-received by growers.
On Tuesday, Tasmanian brokers Alistair and Rob Calvert said from and including this week their Wool Solutions business would extend the payment prompt by one week, requiring payment on or before the Friday fortnight following sale week.
“Storage charges will remain the same and will begin to be charged on the Friday following sale week as is currently the case.”
On Wednesday, Gordon Litchfield notified exporters that the business will be extending the prompt period for payment by seven days as of Sale 45 and the free storage period will also be adjusted by seven days.
This week IWBA members – Moses and Son, Gordon Litchfield and Riverina Wool — followed the lead of Jemalong Wool, that has had an extended 14-day payment prompt for years and also before Easter extended its free storage period to 21 days.
On Wednesday, Moses and Son managing director Marty Moses said the brokerage would from Week 45 extend sale prompt terms by seven days until further notice, and the business would consume freight cost increases and hold its post-sale charge until the end of the current selling season.
“Moses & Son Management recognise the current serious situation with irregular sea freight schedules and the bottleneck at containerisation facilities from numerous discussions with exporter principals and staff,” Mr Moses said.
Mr Moses said recent increased fuel prices had led to transport suppliers applying freight levies of up to 20pc and many brokers had acquired or built additional storage facilities to accommodate the increase in presale held wool and post-sale buyer stock.
“Unfortunately it seems almost certain that the current situation we all face will be with us at least for the next 6-12 months,” he said.
Yesterday, Mr Bazeley as principal owner of Riverina Wool notified ACWEP that from and including Sale M44 next week until the end of season break (in July) the broking business would extend its prompt payment period by one week.
“This is in light of current shipping & finance issues which exist for exporters at the moment,” Mr Bazeley said.
“Once the new season commences Riverina Wool will review this extension of prompt requirement.”
Fellow New South Wales broker Hodge Wool has also notified ACWEP that from next week until the end of season the business will extend its prompt payment period by an extra week and review this when the new season commences.
North Geelong broker Ackroyd and Dadswell also today said it would extend its prompt payment dates by one week from upcoming Sale M44 until the end of season break, when it will be reviewed.
Elders is monitoring the situation
Elders National Wool Selling Centre manager Simon Hogan said the company is monitoring the situation closely.
“We’ve had some internal discussions about the issue and we are working closely and communicating with a number of exporters.
“A percentage of our payments are being made before prompt,” he said.
Mr Hogan said Elders had no control over the storage of client wool after it is sold.
“Once the wool is sold they become a customer of AWH.”
Mr Hogan said Elders wanted to get maximum support for its growers’ wool.
“So we are certainly taking this issue very seriously and want to act in the best interests of our growers.”
No decision on prompt changes at AWN
AWN managing director John Colley said there has been no decision at this stage by the company to extend prompt periods for exporters.
He said payment prompts were an issue for individual action by each broker dealing with their own terms and conditions with the trade.
“It is not something that collectively the industry can look at, it won’t look at and won’t talk about.
“But we’ve got to be careful not to just kick the can down the road and create a bottleneck of wool which is one of our major concerns,” he said.
“It is a free market and it’s working quite well; the reality is the market hasn’t collapsed and growers need the right to sell their wool.
“Every company will make their own decision on what happens; we believe in a free market and by extending the prompt, if everybody does the same thing, it only just kicks the can down the road further — it doesn’t actually solve the issue,” he said.
Mr Colley said the corporates have mostly gone from the wool-buying trade and were mostly smaller family-owned companies that don’t have the finance access capacity of former trading houses.
“Maybe this is their own internal issue as much as anything.”
He acknowledged the shipping problems, but said “we have a business to run as well and we have to pay our bills.”
Broker support well-received – ACWEP
Australian Council of Wool Exporters and Processors president Josh Lamb said the response of the independent brokers in extending payment prompt and free storage periods has been overwhelming and greatly appreciated.
He said the lift in the benchmark AWEX Eastern Market Indicator by 10 cents to 1377c/kg clean should be seen in the context of the drop in the exchange rate. He believed the market should have been dearer still “indicating there is something unhealthy going on in the background.”
“ACWEP and the NCWSBA have been discussing these issues for several months, with input from the inland brokers and a few other groups, and we’ve managed to get some change.”
Nutrien is yet to respond to requests for comment on the situation.