Christmas closures cause boycott

18 Dec, 2002 10:00 PM
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THE final wool sales of 2002 have been anything but smooth this week, with a major buyer boycotting several broker's catalogues at auction.

But the company at the centre of the dispute, Itochu, claims it is brokers who are being unreasonable and costing their clients valuable competition.

The stand-off originated last Friday when Itochu sent a letter to every broker, requesting they agree to extend the "prompt" (the payment deadline for wool bought at auction) for this week's sale.

Under standard trading regulations, buyers have one week from the Friday immediately following auction to pay for their auction purchases.

Itochu is warning that broker and warehouse closures over Christmas will make it extremely difficult to get wool out of store and delivered to customers, so it wants brokers to extend this week's payment and free storage deadline from December 20 to January 3.

"Some brokers are closing on December 23, and not opening again until January 3, while other brokers, like the bigger ones, are closing for three and a half days," Itochu Australia managing director Tony Wilson said.

"We buy wool from all brokers, and for most countries. To get deliveries, we need to have access to all brokers and all dumps, and that is why we believe the extension to the prompt is a reasonable request."

But several brokers, including Elders and Wesfarmers, have rejected the request, and largely for the same reason - they don't believe Itochu will be faced with the delivery difficulties it claims.

"We looked at (the request) in the light of the issues they raised in the ability to get wool out, pay for wool and shipping schedules, and then we looked at it in light of growers needing to have cash flow, and expectations of payment before Christmas," Wesfarmers national wool broking manager Ross Bawden said.

"And on balance we rejected Itochu's request, because we didn't think there would be any problem in getting wool out before Christmas if they wanted to."

At auction on Tuesday, Itochu bid on only four catalogues in Sydney - Fry Wool, Beecher Wool Services, Murrumbidgee Wool and TWG Wool (Itochu's wholly-owned broking arm).

Mr Wilson said the company fully understood the plight of wool growers in regard to drought and needing cash flow prior to Christmas. But he said it was up to brokers to make their plight easier by extending the prompt and allowing Itochu to bid on their wool.

"Brokers who have agreed to our request are better off and it was proven today," Mr Wilson said on Tuesday afternoon. "Itochu bought 31pc of the first four catalogues and the market for those wools was 10-20c dearer.

"We didn't bid on the bulk of the catalogue, which was from Elders and Primac Elders, and that wool finished up unchanged, and 5-10c cheaper in Melbourne."

An Elders spokesman quoted the company's catalogue in Sydney as 5 to 15c "dearer" on Tuesday, compared to Thursday's close.

Mr Bawden said Australian Wool Handlers, which warehoused wool for Wesfarmers, Elders, and several other brokers, would only be closed for gazetted public holidays.

"If Itochu wanted to pay for the wool by this Friday, then they would get the wool out by next week anyway - there is plenty of flexibility to get the wool out and get shipment of it."

"It is true there probably are regional brokers that run small operations that close up for Christmas - my comment would be, buy from a broker that can provide the service and delivery you want."

A representative of a smaller broking company, who did not wish to be named, said he feared that support for Itochu's request would ultimately lead to the loss of the one-week prompt payment regulation, a gain brokers and growers had fought long and hard to secure.

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