The WEP’s creation is a key recommendation in a 44-page discussion paper released online today and to be debated at a key stakeholder workshop in Melbourne on July 21.
The discussion paper was developed by an Australian Wool Innovation-appointed Wool Selling Systems Review (WSSR) Panel after 68 submissions were received to an issues paper released in December 2014.
The panel also believes the Australian wool selling systems need modernisation, and electronic selling systems should be investigated.
“They can open up markets to new participants, lower participation costs and provide for easier and faster dissemination of market information creating the potential for greater transparency,” the panel said.
The WSSR focussed on the processes and costs involved in the exchange of wool ownership from the shearing shed through to the ship’s rail, except for the statutory wool levy.
Panel proposes “deeper” investigation of selling centralisation
The discussion paper outlines several opportunities that might deliver operational efficiencies and reduce costs in the process of selling wool, including:
– deeper investigation of the centralisation of selling centres;
– the development of on-farm wool testing options, and;
– greater transparency of broker charges and a further investigation of commission buying and its effect on sale room competition.
The panel believes there are no institutional obstacles preventing these opportunities from being progressed.
“However, dealing with these issues on a piecemeal basis is unlikely to provide meaningful and ongoing benefits to Australian woolgrowers.
“The panel therefore proposes a more all-encompassing solution that not only addresses the existing identified issues within the wool supply chain, but also creates a platform to provide for ongoing industry developments as well as advancements in technology.”
Online portal would help growers decide on selling options
The panel said the proposed portal would provide woolgrowers with an online tool to assist them in making informed and suitable wool-selling decisions. It would also address identified issues within the wool supply chain, and create a platform for industry developments and technology advances.
The proposed WEP would include:
– An extensive information database of selling options available to woolgrowers;
- An online meeting point where woolgrowers and buyers could detail wool on offer or sought;
– A ready-reckoner to assist woolgrowers to assess the financial outcomes of selling alternatives including the current dominant ‘open cry’ avenue;
– A ‘smart router’ that would promote the best outcomes for woolgrowers based on pre-set selling parameters;
- Delivery of different testing and appraisal options, and;
– A ‘find a broker’ and ‘find an exporter’ function.
Proposed portal would not replace existing selling options
The panel claimed the portal would not replace any of the existing selling channels or alternatives, but work with them and said it recognised the difficulties involved in driving industry level change in an unregulated market.
“It has observed that a number of important wool industry institutions all with very different corporate structures and constitutions sometimes appear to be working towards different industry objectives.
“Wool industry organisations – in particular AWI, AWEX and AWTA – play a critical role in getting Australian wool to market.”
Any proposal to adopt new selling systems will need the involvement and cooperation of all organisations working in tandem if they are to succeed, the panel said.
Panel identified cost, pricing and trading as priority areas
The WSRR panel also identified several ‘priority areas’ outlined in the discussion paper:
- Operational efficiency in selling Australian wool – the logistics and costs of transporting, storing, testing, auctioning or use of other selling methods, and delivery to the ship’s rail for export.
- Pricing efficiency of selling Australian wool – ensuring that price realisation – the price in the market – reflects the underlying demand for, and supply of, Australian wool.
- Consolidating and improving the choices on offer to woolgrowers and buyers using available technology – this will facilitate the growth of alternative trading pathways not used intensively to date, and at a reduced cost.
The WSSR panel includes Fox and Lillie managing director James Lillie; Monash Business School adjunct Professor Graeme Samuel; consultant and director Bernard Wonder; Australian Investor Relation Services director William Wilson; Bell Financial Group executive chairman Colin Bell, and; Eubindal Pty Ltd director John Roberts, the panel’s executive officer and secretariat.
The key objectives of the WSSR are to improve the returns that woolgrowers receive for their wool through:
– evaluating whether greater efficiencies and cost savings within the exchange of ownership between the seller and the first buyer are attainable
– understanding the potential for increased competitive tension throughout the wool selling process and how it can be achieved, and
– determining whether there is sufficient transparency within the exchange of ownership to allow woolgrowers to make the most informed commercial decisions about their wool growing enterprise.
Click here to read and download the WSSR discussion paper. Any comments or submissions on the discussion paper can be emailed to [email protected] Final submissions to the review are due September 4, 2015.
Source: Australian Wool Innovation.