By Simon Edwards
Breaking down the silos in the wool value chain and pulling together as one is essential for the industry to thrive again, Federated Farmers Meat & Wool Chairperson Toby Williams says.
“We really need some consolidation. The commercial interests on the processing side are dominating at the moment and the returns to growers are unsustainable.”
Toby points to the success of Zespri and Fonterra, single and dominant sellers respectively in their market segment, “able to control the narrative and direction around their product”.
With one group controlling wool again, there’s better potential for gains from new markets and products to be shared. Right now, commercial interests outside the farm gate benefit from being able to buy the raw product at the cheapest possible price.
“It’s essential that growers have a stake in the IP and actually get paid for the product. At the moment it’s about a 50 percent return. If we continue on the current trajectory, people will just walk away. Farmers can’t continue to pay more to take the wool off our sheep than we get from it.
“We are seeing that in droves now, with conversions to forestry and people shifting focus to shedding sheep. Another six months and it will almost be too late,” Toby said.
The Feds national board member canvassed some of these issues when he addressed the Primary Production Select Committee recently, and floated the idea of a return to a wool levy.
Any such move deserves debate, he told FedsNews. A levy is one way of funding a new leadership structure and it provides a marketing budget.
“But we’ve got to be careful about this. Levies have failed in the past, and the organisations that rely on them continue to be under threat. The people who control the levies, the boards and management around them, don’t always listen to what the levy-payers want them to do, or fail to deliver.”
Another potential avenue for building farmer confidence are contracts, Toby said.
“Farmers need to be offered contracts saying, ‘I’m going to pay you $4 a kilogram for your wool, so long as you meet the specifications’. The growers get a guaranteed price and it doesn’t cost them to get the wool off the sheeps’ back; the buyer and end user gets a guaranteed quality of product.
“Together we compellingly tell that story that wool ticks all the boxes – natural, recyclable, fire retardant, carbon storing, excellent for warmth and insulation and all the rest of it.”
Toby told the Select Committee that farmers were frustrated.
“I think it’s probably 10 years ago that I last really made money off wool.
“It costs me about $40,000 to shear my sheep every six months, so that’s $80,000 a year for around 6000 sheep. Our return this year on the last shear was $30,000 – a 25 percent loss.”
Toby told the MPs that farmers don’t expect the Government to be the white knight and ride in to rescue the industry. While the blunder over the synthetic wools in rural classrooms was a negative, the sector was grateful for the Government investment in Wool Impact. That’s the collaboration between the government and sheep sector partners under the Sustainable Food & Fibre Futures fund to grow revenues for wool. The three-year programme has a $6.9m investment from sector partners and government investment of $4.5m.
Toby’s view is that it’s the sector’s responsibility to get its own house in order in terms of a workable single body and leadership structure before it looks to the government for more investment. Federated Farmers, as an organisation fighting for growers’ interests, can take a lead bringing people together on that mission.
He’s confident there’s a future for wool because it’s such an incredibly versatile product.
“We need some out of the box thinking. Whether it’s using wool as a component in building super yacht hulls, wind turbine blades or in medical products…
“The world didn’t know it needed an iPhone until Steve Jobs got up on a stage in California in 2007, held up one of them, and said ‘this is the future’.”
