News

Proposed Wool Exchange Portal will overcome industry inertia says panel

Terry Sim, July 22, 2015
WSSR panel chairman Graeme Samuel

WSSR panel chairman Graeme Samuel

AN ONLINE Wool Exchange Portal concept has passed its first test in a workshop attended by Australian woolgrower, processor, trading and testing house leaders in Melbourne yesterday.

But final industry agreement on the online wool marketing options proposal and its funding will be unclear until after the Australian Wool Innovation’s Wool Selling Systems Review panel takes more submissions and makes a final report, possibly by October this year.

About 80 invited wool industry stakeholders attended the workshop to give feedback on the AWI Wool Selling Systems Review discussion paper to the WSSR panel.

The 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 WEP has been proposed by the panel as part of its review of wool selling systems to find efficiencies and cost savings, understand the potential for increased competitive tension and determine if there is sufficient transparency for woolgrowers.

The panel has proposed that the online WEP include a database of wool selling, testing and appraisal options; a ‘ready reckoner’ and a ‘smart router’ of selling alternatives, and a ‘find a broker’ and ‘find an exporter’ function.

WSSR panel executive officer John Roberts said there was very productive and robust discussion among the exporters, brokers, woolgrowers, consultants, forward market operators, testing house and online exchange representatives at the workshop.

Panel chairman Graeme Samuel said submissions will continue to be received until September 4 and the final report delivered to AWI and industry, possibly by the end of October.

“The whole report — it is up to the industry to say ‘yes we adopt’ or ‘no, we don’t’.

“If they do, it is a process of implementation as they see fit.”

Workshop participants came around

Mr Samuel said the general reaction early in the workshop that “the industry is working alright” and “what are we here for”, particularly in regard to initial scepticism about the Wool Exchange Portal, changed later in the day to the offering of suggestions.

“We were getting suggestions from participants as to aspects of the WEP that they might be able to contribute to and elements of the WEP that we might want to think about.

“So they are actually starting to think that this is something that we ought to be looking at and would be interested to participate to assist in doing so,” he said.

“I don’t think you could say that there was 100 per cent support for anything, because in all the areas that we were talking about today there were those who have a vested interest in leaving things exactly as they are.”

WSSR panel member James Lillie

WSSR panel member James Lillie

Panel member James Lillie said many stakeholders changed their attitude to the review during the workshop. Panel member William Wilson believed many at the workshop felt they had some ownership of the process, that there could be benefits and they wanted to be involved in its development.

Some stakeholders also said there was “a sense of inertia” in the industry along the lines of “We’ve done this for years, what is the point of changing? There is not a lot in it,” he said.

“But I think, particularly with the WEP discussion there was a sense of ‘there might be something in this.”

Mr Samuel said the exporters tended to be more vocal and supportive of the WEP.

“I didn’t hear much from the brokers and heard a lot from growers.”

He said the attitudes of growers to the WEP varied greatly.

How will the WEP affect current online wool trading options?

Mr Samuel said some of the workshop participants suggested the panel should get some input from the current online selling options, AuctionsPlus Wool and Wooltrade.

Elements of that might be able to be integrated or “overlaid” into the WEP, he said.

“Remember the WEP is a one-stop shop.”

WSSR panel member Bernie Wonder

WSSR panel member Bernie Wonder

But panel member Bernie Wonder said the panel was not suggesting the WEP would duplicate Wooltrade or AuctionsPlus Wool.

“We see it as a strength, not a concern that we can actually make use of existing institutional mechanisms that are already there and we can actually embrace them under an umbrella.”

Mr Samuel said it was now a matter of developing the WEP concept.

“Part of the process now over the next few weeks is to engage in more targeted consultations on specific areas and particularly the WEP with a view of developing into a more analysed and detailed proposal.”

Mr Wilson said while there was broad acceptance of what the WEP was trying to do, stakeholders also made suggestions to expand its role into areas such as hedging or futures. Stakeholders also raised the issues of quality and accountability in online wool selling or other innovations.

Mr Wilson said the WEP could also offer connectivity to wool futures and derivative marketing options.

Who will pay for a Wool Exchange Portal?

Mr Samuel said a range of options could be considered for the funding of the WEP, including industry participants that use the portal.

WSSR panel member William Wilson

WSSR panel member William Wilson

Mr Wilson said the panel members made it “very clear” they were not proposing that the WEP be funded from levy funds “in the first instance”.

“To be fair we felt that if we do our job correctly and we get the buy-in of industry, then we really want their ownership of it.

“Now what ownership meant could vary, but certainly whether it be investment or in fact, build something that may have commercial opportunities attached to it as well,” he said.

“It was fair to say that given this industry is an unregulated industry that any initiative that we propose has to have commercial implications.

“We can’t impose a WEP on the industry, the industry needs to see that it has got commercial benefit.”

Mr Lillie said his view was that AWI would have to “tip in a bit” on behalf of growers.

“Half of them (the growers) said no and half said yes.”

Mr Wonder said there was grower interest in funding the WEP, but the issue needed more consideration by the panel.

A workshop suggestion for a vote on the funding of the WEP was disallowed by Mr Samuel and no other votes on any issues were made at the workshop.

Mr Samuel said the purpose of the proposed portal was to facilitate growers adopting various wool marketing options to help overcome “inertia” in the industry.

“The portal is a platform for the future as well as the issues we see at the moment.

“It also puts us on a footing to deal with the other issues that may arise,” Mr Wilson said.

Mr Samuel believed the WEP “will start to crystallise a whole range of issues.”

“What the WEP does is open up a whole range of courses of action that potentially deal with the operational issues that we’ve raised in the first part of the report and the pricing efficiency issue.”

These included different selling mechanism and route choices, and buying options and processes, he said.

“The discussion paper starts off with operational and pricing efficiencies, and then gets to the solution.

“I think if we now work a lot harder on the solution — the recommendation — that will start then to deal with the operational and pricing efficiencies.”

WEP information on selling options will lead to competition

Mr Samuel said “competition in many respects is a much better discipline than full transparency of every element of a business or operation” and by providing more information about participant selling options the WEP will facilitate competition.

“The portal is designed to do that – it is designed to open up options for growers.

“The portal might even develop sufficient sophistication that it will indicate to the grower that for particular grades at a particular time, with particular volumes, if you adopt option 3 that will get a better result than adopting option 1 – that’s options.”

The same process could work for buyers seeking wool, Mr Wonder said. However, Mr Lillie said it was highly unlikely that brokers would list their charges on the WEP.

But Mr Samuel said “You will only want one broker to list its charges on the WEP for growers to say ‘That’s really interesting, I might go with that broker’, and then a second broker will say, ‘Well I better do the same thing and I will actually come in with some lower charges’.

“The beauty of the way in which a WEP works is that provides transparency and accountability – and that happens through competition,” he said

“That could cause it to happen,” Mr Lillie said.

But the greatest challenge to the WEP will be training woolgrowers in how to use it, he said.

WEP could start an incremental change process

Mr Samuel said the review and the WEP would not be “the answer to everything’ for Australian woolgrowers and the industry.

“This will be a process to incremental change and it’s a process of incremental change that will be entirely dependent on the industry adopting it.

“So the task that is ahead of us is to actually be certain that we are recommending is good for the industry and then to present it in a way that the industry is compelled to adopt that incremental change,” he said.

“And if they adopt the incremental change that we are recommending here — particularly the processes of moving into the WEP – it gives the chance then for that incremental change to gather pace and to work on itself.

“Change then becomes inexorable, whereas at the present time change is inhibited, it is impeded,” Mr Samuel said.

“There are too many barriers in the way, including the barrier of inertia.

“What the WEP will start to remove is that (inertia) barrier and start that incremental change that we think the industry deserves.”

Mr Roberts said the panel had maintained it wanted to be highly consultative and “try to bring everybody along for the journey and give them some buy-in or some ownership of this whole process”.

“I think we went a long way in achieving that today.”

Any comments or submissions on the discussion paper can be emailed to [email protected] Final submissions to the review are due September 4, 2015. Click here to read the Discussion Paper.

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Comments

  1. Edward H Wymer., July 26, 2015

    Alex, you say ” That Australia is a high cost country to produce any product.”
    There is not a woollen garment, from socks to suits to blankets, where the cost of the wool would be above 5 percent of the final price of the product. So your statement is irrelevant.
    In your submission to the WSSR you talk up economic wool producers, ” Sealed bid Auction”, failing to say they told growers they would receive the highest bid, and buyers that they would get said lot at one minimum bid above the second highest bidder.
    You also support selling unskirted/unclassed wools, which most of the important people — the buyers — do not; as indicated in 33 of the 68 submissions to WSSR, which I scored 10/10, including the one by Peter Small.
    Sorry but your submission was convoluted and change for changes sake, and didn’t score so well. woolman.biz

  2. Peter Small, July 24, 2015

    Alix, In your post above you say “…the real challenge is what options are available to streamline procedure and extract the required prices that are required to improve growers’ net returns?” This is the magical question that we would all, of course like answered. The July 2015 Discussion Paper released by the WSSR Review Panel, Page 10 details all the current costs per kg from Shed to Ship; these total 95.38 cents. If it was possible to slash these costs, say by 50%. An increase in growers returns of 45cents a kilogram will do little to improve growers fortunes. Also if we are to take Graeme Samuel’s advice to the discussion day, that the panel believed there were no regulatory problems and there was plenty of competition and options for both growers and buyers, then perhaps we are looking in the wrong spot. I would therefore be brave enough to suggest that the problem is lack of demand. Perhaps, just perhaps, we are all on a wild goose chase to deflect attention away from the real problem:the body that initiated the review, rather than the selling system or some extraneous “portal”!

  3. Alix Turner, July 24, 2015

    Whilst the proposed Wool Exchange Portal (WEP) could usefully add holistic transparency to the workings and options available within the wool supply chain, particularly for growers, how much can it effectively address the underlying problem that led to this review being initiated in the first place?
    The realities are that world fibre markets are extremely competitive and that Australia is a high cost country to produce any product, especially any product destined for export markets. This has led to a well established trend of producers turning to alternative forms of land use because the problem of inadequate net returns. Thus the real challenge is what options are available to streamline procedures and extract the improved prices that are required to improve growers’ net returns? If the industry is unable to identify and adopt appropriate procedural reforms there will be limited value in having a WEP that is little more than a menu of options that make such limited use of advances in relevant knowledge and technology. If this review is to deliver full value it is incumbent on it to clearly identify the various available procedural reforms, many of which have existed underutilised for years, that can not only streamline the system and thus lead to improving growers’ net returns. Whilst there can be little doubt that some vested interests will be both ignorant of the nature of available opportunity and instinctively resistant to change, how much further can they allow the industry to shrink? After more than forty years of ignoring substantial availability for beneficial procedural reform isn’t it time to finally bite the bullet?

  4. Edward H Wymer., July 22, 2015

    How can Mr William Wilson say that,” It was fair to say that given that this industry is an unregulated industry”. When there are hundreds of rules and regulations at every stage of the shearing, classing, handling and selling of wool. As their should be, how would it have survived for 175 years without them. woolman.biz

  5. Peter Small, July 22, 2015

    As one of the 60 or so who made a submission to this Review, I attended the above reported discussion on Tuesday the 21st. at the Rialto in Melbourne.
    As a participant at various times in most facets of the Industry, I participated actively in the discussion. The report above, in my view does not reflect the outcome of the meeting. If any one else who attended shares my view then I am happy to be contacted by email. [email protected].

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