WOOL brokers, processors and exporters have hit back at criticism of the open cry auction system by Australian Wool Innovation chief executive officer Stuart McCullough.
Mr McCullough has been quoted claiming a lack of modernisation and ‘digitalisation’ in the open cry auction wool-selling system.
In Western Australia last week ,while defending AWI’s Wool Selling Systems Review during the WoolPoll 2015 roadshow, Mr McCullough was quoted by Countryman newspaper as saying:
“There has been no modernisation in the present auction system in 100 years.
“It makes no sense that 95 percent of Australia’s wool is marketed through open cry,” he told the newspaper.
In the Stock and Land newspaper earlier this month, Mr McCullough made similar comments and despite the availability of online selling through AuctionsPlus Wool and Wooltrade, said there had been “no digital disturbance” in the wool auction system. He also said AWI was prepared to fund a new Wool Exchange Portal, as recommended by the WSSR panel, if it was supported by growers.
In a statement yesterday attributed to the presidents of the National Council of Wool Selling Brokers of Australia, the Australian Council of Wool Exporters and Processors and the Inland Wool Brokers Association, Mr McCullough’s comments were described as “false and misleading.”
Inland Wool Brokers Association Wayne Beecher said Mr McCullough statements downgraded the wool industry.
“They are untruths when you say it hasn’t been modernised in 100 years.
“Basically every sector of the wool industry is electronic far beyond any other agricultural business,” he said.
“To say it hasn’t been modernised in 100 years sends all the wrong signals out to everybody because it is not correct.”
He said Mr McCullough’s comments “had the look that AWI’s Wool Selling Systems Review had been pre-empted.”
“The perception is it is pre-emptory and the other perception is it is downgrading the industry.”
“You would have to say it seems as though they are not happy with so much wool being sold through open cry, but I don’t know what the alternatives are,” he said.
“If there were alternatives we would be using them a lot more than what we do.”
Mr Beecher said all brokers had tried to use Wooltrade and before that an AWEX bid and offer board system “with not much success; it is sort of very, very second rate to the open cry.”
“Open cry is such a quick way to transfer ownership, it’s 250 lots an hour, we can’t even get close to that electronically.”
He said brokers welcomed innovation and competition in wool selling, but were not interested in systems that did not include pre-sale wool inspection.
“If they came up with something that worked in the system and brought competition you would have to welcome it.
“We did not want to come across as negative about the Wool Selling Systems Review; we are happy if something comes out of it that makes a difference.”
Open cry comments not substantiated
ACWEP executive director Peter Morgan said Mr McCullough had not said why it was not a good thing that most wool was sold open cry nor did he substantiate the 95pc claim. Mr Morgan said if AWI paid for the Wool Exchange Portal it would be with woolgrower funds anyway.
“Our view is that it is difficult to argue that the review is at arm’s length (from AWI) in those circumstances.
“We still have no problem with the review.”
Mr Morgan said ACWEP supported the review process, but said there was an increasing view that the WSSR panel has some “pre-conceived views.”
In its second submission to the WSSR, this month, ACWEP said the panel’s attention has been almost exclusively directed towards the development of a Wool Exchange Portal, which had previously been described as a concept.
“The industry has not yet seen any data to support whether the heavy dependence on the open cry auction is a problem, or otherwise.
“ACWEP also believes that any commitment to funding a portal is premature until more detailed analyses of the costs, benefits and likely uptake by buyers and sellers is better known,” the submission said.
ACWEP also believed a number of issues it raised have been given inadequate attention, including pipeline costs, transparency of charges, exchange of ownership and the question of whether AWEX and AWTA should be merged.
Exporters and brokers defend wool selling advances
The three wool bodies said today’s auction system is vastly different to that of 50 years ago when open wool bales were placed on how floors for inspection.
“Fifty years ago there was only manual recording of information for the exchange of ownership and auctions were conducted in three sale rooms over several hours with no electronic technology, in thirteen auction locations around Australia,” they said.
The wool body leaders said there was now a modern-day, efficient auction system with electronic exchange of information and recording of each sale in three locations.
They said examples of the industry embracing change and modernising the auction system, included:
– the introduction of sale-by-sample replacing bales of wool on the show floor and the use of objective test data
– the introduction of sale-by-separation, which led to the reduction to three wool selling centres and significant cost efficiencies.
– pre-sale testing which provided woolgrowers with better knowledge of commercially important characteristics, including micron, yield, length, strength and the position of break.
The presidents said the wool industry was one of the first to extend computer use and electronic technology from finance and accounting functions into improving business efficiency.
“The industry pioneered the electronic exchange of data associated with the exchange of ownership in 1978.
“Advances in information technology allowed this to evolve quickly during the 1980s to the stage where high speed, cost efficient, error-free exchange of data occurs along all sectors of the wool pipeline,” they said.
Alternative methods can’t compete with open cry speed
The industry has also investigated or implemented alternative methods to the use of open cry auctions, since the 1970s, ranging from sealed electronic tenders, electronic offer boards, digital imaging of samples, and electronic replication of the open cry process, the wool leaders said.
“Offer boards are in place and act as an important supplement to the auction.
“Even so, none of the technologies developed to date have demonstrated the ability to extract the same level of competition, speed and efficiency as open cry auctions.”
The wool body presidents said more than 250 lots are sold each hour with the open cry auction system, providing instantaneous price discover.
“Our organisations and our members were, and remain, committed to the Wool Selling Systems Review process, but recognise that success will only be maximised if due process, as set out in the Review Issues Paper, is followed.”