Wool market indicator push

15 Jul, 2016 02:00 AM
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4
 
Woolgrower groups are discussing developing a comprehensive wool price list by micron category for customers in an effort to sustain current product levels. Pictured is AWGA chairman Chick Olsson and sons Daniel and Josh.
Woolgrower groups are discussing developing a comprehensive wool price list by micron category for customers in an effort to sustain current product levels. Pictured is AWGA chairman Chick Olsson and sons Daniel and Josh.

AN indicative micron price guide is being developed by Australian Wool Growers Association (AWGA) in an attempt to sustain current volumes of wool production.

AWGA is establishing a detailed comprehensive wool price list by micron category for customers, which chairman Chick Olsson said would reflect the cost of production, including a five per cent return on capital model.

“Who can survive in any market not knowing what prices they are going to receive from year to year?” Mr Olsson said.

“It’s an outdated and inefficient system that has seen a severe decline in wool production.”

“By sending a simple price list to customers, we begin to let them know what we need to survive and make a modest profit.”

He dismissed claims the move was similar to the ill-fated Reserve Price Scheme which crippled the industry when it collapsed in 1991.

“This is only an indicative micron price list for customers to see what they have to pay to maintain current volumes of wool production,” he said.

“This type of commercial approach will promote more understanding with our customers, allowing them to also factor into their costings what we require to remain growing current volumes.”

While WoolProducers Australia had not been involved in the development of the price guide, WPA chief executive Jo Hall said it welcomed the development of any tool that assisted woolgrowers in calculating their returns for the wool they were producing.

Australian Council of Wool Exporters (ACWE) president Chris Kelly said “meddling” with market forces would not be supported by the industry.

"Any hint of a reserve price people are dead against,” Mr Kelly said.

“Universally, exporters will have an issue because we are still quite raw with what happened with the last reserve price.

“Any meddling with the market makes everyone very nervous.”

He said exporters operated on high risk and limited profit margin of about one per cent, and “to cut the fat - if there is any - is risky”.

“The discussion to look at sustaining volumes is healthy and the concept is too, but everyone in the industry is battling slim profits which we have seen with the hand to mouth buying by processors who have no long-term orders from October, November and beyond,” Mr Kelly said.

“The current volumes are perfect for supply and demand, so hopefully the short-term rebuilding phase coming out of drought is done slowly to sustain the current levels."

National Council of Wool Selling Brokers of Australia declined to comment.

FarmOnline
Annabelle Cleeland

Annabelle Cleeland

is the national sheep and wool writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
15/07/2016 11:46:42 AM

You are a bit tough on AWI angry Australian- wool prices are improving- they must deserve some credit!
angry australian
15/07/2016 6:47:32 AM

Let me add Mr Kelly,a builders labourer in Melbourne or Sydney purportedly earns in the area of $150 k + super+ holidays + so many rdo's and with no investment. In 2014 AWI paid its employees at least $18.359 m with no risk or no outlay, want to tell me what a wool exporter earns as a salary before his profit? What do you fear Chris? As far as I can see Chick isn't proposing a reserve price, he is just going to inform the market of what the cost of production with a modest profit is, And I am sure that the figure provided will be an under estimate!
angry australian
15/07/2016 6:19:17 AM

Congratulations Chick great leadership. Really something that should have been done by AWI with all those 100's of $millions they squirrel away in Sydney, but they obviously need the money for more important things like overseas offices and trips to the fashion capitals of the world. As for Mr Kelly and " exporters operated on high risk and limited profit margin of about one per cent, and “to cut the fat - if there is any - is risky”."" I'm way too old to believe in fairytales, Chick is prepared to open his books, will you open yours?
Jock Munro
15/07/2016 2:48:55 AM

Perhaps Chick you might be better off considering setting up an Australian Wool co op to market our wool-you can see by the reaction to your idea by the middle men merchants that they have no interest in the level of grower returns but are centred on keeping control of the industry. The merchants will do anything and say anything to maintain their position of power and control.

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