WESTERN District woolgrower and knitwear company chairman Peter Small fears Australian Wool Innovation’s Wool Selling Systems Review has an agenda to end auction wool-selling in favour of electronic selling through the proposed Wool Exchange Portal.

The WSSR panel has consistently claimed the proposed portal would not replace any of the existing selling channels or alternatives.

But after attending the WSSR stakeholder workshop in Melbourne on July 21, Mr Small, the chairman of Quality Softwools Australia believed the review is driven by similar instincts that led to the development of the failed Reserve Price Scheme.

Mr Small has been growing wool for 60 years and has experience in buying and processing wool is chairman of Quality Softwools Australia, owner of the Tooralie knitwear brand. He was also a member of the Australian Wool Industry Conference when Bill Gunn was courting votes for the introduction of the Reserve Price Scheme.

Media presented with ‘sanitised view’ of WSSR workshop

After reading press reports based on a press conference with the WSSR panel, Mr Small said it seemed the media was presented with “a sanitised view of the discussion rather than what actually took place”.

At a media conference after the Melbourne workshop reporters were told by review panel chairman Graeme Samuel that 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, while the attitudes of growers to the WEP varied greatly.

But Mr Small said: “That’s not strictly correct – John Colley from Australian Wool Network – a very important broker – engaged very much in the discussion.”

Exporters were “fairly silent” during the workshop, but several congratulated him on his input at the end, he said.

Mr Small believed the review was motivated by a view that growers were being disadvantaged by selling cost “rorts”. However, an interim analysis in the discussion paper calculated the average greasy wool selling cost from shearing shed to ship’s rail as 95.38c/kg.

“Even if you cut half of them out and I don’t think that is possible, it is only 48 cents.

“48 cents is not going to make a tinker’s cuss difference as to whether people grow wool or an alternative product.”

Mr Small said review chairman Graeme Samuel told the workshop that the panel couldn’t find any issues of competition or evidence of cartel behaviour in the industry, that it was unregulated and transparent, with plenty of competition from many brokers and exporters.

“This review has obviously been a costly exercise (reportedly almost a million dollars), so they had to come up with something – so they have come up with this information wool portal idea.”

Growers know their wool marketing options – Small

But Mr Small said it is ridiculous to propose that wool growers could not determine what the various options for selling wool are and needed an online portal to sell wool.

“It is ridiculous, but they had to find something.

“What I fear that about this review is that it will start to develop a life of its own,” he said.

“Already it is apparent that what started off on Tuesday as an information portal has developed into a electronic selling system.”

Mr Small said he told the panel the proposed Wool Exchange Portal had to have “commercial feet” and had to be paid for and updated commercially.

“It should not use any of our wool tax money.”

Concern about review’s agenda

Mr Small said he was concerned the agenda of the review was an electronic system with implied sale by description.

“The trade – from growers to exporters – are very apprehensive with this type of chatter.

“I think we have to be very suspicious — I told Graeme Samuel wool bureaucracies have never changed their agenda in all my lifetime – sale by description, get rid of the brokers, get rid of the industry.”

Mr Small said over the years he had seen wool growers continually “corrupted by the bureaucracy.”

“They have spent all this money on promotion and it doesn’t lift the price of wool and so therefore they say, if promotion is not the problem, it must be the selling system.

“They have always got to find a furphy to blame because their promotion is so good it must be some other problem.”

The wool selling systems review’s conception was preceded by statements by AWI chairman Wal Merriman in April last year that limiting weekly wool market supply should be considered to ease market volatility.

“I think we need to have some control of the amount of wool going onto the market each week,” Mr Merriman reportedly told the ABC.

Mr Merriman claimed at the time there were no plans for a new reserve price scheme, but he said AWI would conduct research into how wool was sold. By November 2014, Mr Merriman was saying the AWI-commissioned Wool Selling Systems Review aimed to determine if the wool selling system provided optimal financial return to growers. The key objective of the current Wool Selling Systems Review (WSSR) is to improve the returns that wool growers 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.

Will the Wool Exchange Portal become another bureaucracy?

But Mr Small is concerned the review is going to create another wool bureaucracy, initiated simply by a displeasure with wool prices.

“Because the promotion doesn’t seem to be working, wool prices haven’t been lifted then there will be another bureaucracy to try to fix the problem, while the real problems are the wool bureaucracy, and its failure at promotion and failure to lift demand.

“Get the bureaucracy out of it and the industry will start to flourish and that has always been my line.”

But Mr Small believed the review was conceived by the levy-funded wool bureacrats, who seem to be influencing Mr Merriman, “as they did Sir William Gunn many decades ago”.

“This industry has got to very careful because we are just starting to climb out of all this crap created by the Reserve Price Scheme.

“We can easily fall back into it again if the panel thinks the least dangerous thing to engage in is this idea of a website (the Wool Exchange Portal) with some information on it – thinking that would be an outcome,” he said.

“Having spent $1 million and got people involved like Graeme Samuel, they are unlikely to say nothing has come out of it, that it is a waste of time.”

Mr Small said the problem he sees with the WEP is “that it might not be just a benign outcome, it might actually start to develop legs that give us another set of problems.”

“It is only going to create arguments to put us back years.”

He said some people held a very simplistic “fairytale” view that wool could be traded like company shares.

“I stood up and said you guys have got no understanding of the skill of the exporter in putting together 200 or 300 bale batches of wool that will process by overseas top makers the same this year as last year.

“This is what selling wool is about – it is about putting wool together into combing lots that perform consistently – I don’t think the panel understand all that.”

Wool Exchange Portal as a selling mechanism?

Mr Small said the panel mistakenly believed the portal could be developed into a selling mechanism, while there is nothing inhibiting electronic selling of wool developing organically within current market forces.

“If it becomes more efficient then of course, the industry will move with it.”

Mr Small everyone in the wool industry wanted to cut costs.

“There is no featherbedding anywhere.”

Mr Small said the wool industry is still recovering from the loss of capital from “the last debacle, the reserve price scheme.” In his WSSR submission to the WSSR, he said the review is an example of waste emanating from AWI.

“Any money wasted results in less available to rebuild the stock of industry capital.

“A good start to a more vibrant profitable industry would be to return the 2pc wool tax on growers gross proceeds to the growers, who will surely spend it more wisely than AWI.”

Bairnsdale woolgrower told brokers “didn’t want to give it legs”

Bairnsdale district woolgrower and former broker Allen Sheridan at Bengworden said he was concerned that the media only was told only “one side” of the discussion during the Melbourne workshop.

The former Australian Estates manager in Bairnsdale has worked for wool brokers for 24 years and been a woolgrower for 40 years. One broker told him after the Melbourne workshop they had not commented during the discussion “because they didn’t want to give it legs”.

“That was his exact wording, they didn’t want to give the meeting legs.”

Mr Sheridan said his impression from the meeting is that people were happy with the current selling systems, though “maybe with a bit of tweaking,” but he saw no reason for the review as most wool growers were selling wool through the auction system.

“My point all along is that if 90-95 percent of wool growers are using the auction system and are reasonably happy with it, why do we have to spend a million dollars of our levy money to conduct this review?

“I am quite happy to pay a levy, but it appears to me that the only thing the review could have been put on for was to try to let the wool brokers see that AWI is doing something.”

He said wool prices have had their “ups and downs” with feasts and famines for wool growers, in his 65 years in the industry.

“That’s the industry we are in and if you are not happy with that then get into something else.”

WEP was discussed with Chinese mills

The Melbourne workshop was told the proposed Wool Exchange Portal was discussed with Chinese mills and buyers, who sought the retention of exporters to finance and put wool together.

A centralised selling discussion during the Melbourne workshop prompted a walk-out by some brokers, but one broker told the panel that reducing the auction sales to any less than the three current centres in Sydney, Melbourne and Fremantle would give no cost advantage. The discussion then ended and the brokers returned to the workshop.

National brokers council nothing to say “for or against”

National Council of Wool Selling Brokers of Australia chairman Simon Hogan declined to comment after the workshop and referred Sheep Central to executive director Chris Wilcox.

Mr Wilcox said the NCWSBA wanted to be involved in further discussions on the Wool Exchange Portal if the industry decided to go ahead with it and would be making another submission to the WSSR panel.

“Really it is just an idea and there is no bones to it really, let alone flesh and skin.

So there is a fair bit of discussion to go on to get a real sense of it,” he said.

“They said as much, it is a concept, an idea and they want to get some feedback.

“We’re not making any comment for or against it.”