Major buyer bypasses wool auction system

During the recent China Wool Industrial Association’s Wool Salon at Lal Lal Estate, near Ballarat, Victoria, Tianyu Wool owner and president Qingnan Wen announced the creation of a woolgrower group which will circumvent the auction to supply China directly.

Tianyu is China’s biggest wool topmaker and scourer, purchasing 6.5 per cent of Australia’s wool clip, or 105,000 bales this season.

Through the interpretation of Australian Wool Testing Authority China manager Robert Wang, Mr Wen said initially, a consignment of 1000 bales, purchased direct from 10 woolgrowers, would be trialled.

Mr Wen said the move was about market stability for both processor and woolgrower and to sure up supply.

“What I would like to see is us work together to stabilise the supply chain,” Mr Wen said.

“Otherwise someone is making a hell of money and someone is making a big loss.

“This is not very healthy situation for the long term development of the industry.”

The contracts are reportedly being negotiated over a three to 10 year period, at prices of $18 to $22 a kilogram for predominantly 19 micron fleece.

The trial anticipates to improve feedback about Tianyu’s processing requirements to contracted growers, with the aim of ultimately selecting non-mulesed wool in the future.

“I never said I want to eliminate the open cry system, I think the system is good and fair, but what I am thinking is that the wool price and market is like a roller coaster,” Mr Wen said.

“Now while wool prices are very high, people are happy, but when they’re down the bottom, there is a lot of misery.”

The comments were made during CWIA’s conference which was attended by 130 delegates, representing China’s 80 major wool processors who purchase $2 billion of Australian wool each year.

Wool buyer Scott Carmody, of Lempriere Australia and Global Wool, said direct contract with processors and woolgrower was not a threat to the auction system.

“This type of purchase method has been around for more than 30 years,” Mr Carmody said.

“In some sense it is not a threat to the auction system – digitalisation in our industry is a threat to the auction system.”

He said the 1000 bale trial was a “dip in the ocean” of the estimated 1.6 million bales sold at auction annually.

“If the price is right, the grower is going to make the decision (on where to sell),” he said.

“Feedback is quite often one of the missing links if they sell their wool at auction.

“As wool buyers we hear that there is a lack of communication and growers don’t know where their wool is going once it is sold - this forms a closer alliance between the grower and processor.”