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Push to capture wool funds

Now that woolgrowers have dumped Meat & Wool NZ during its levy referendum, new options are being floated to snare millions in farmer cash.

About $6.5 million per year would have been collected from woolgrowers by Meat & Wool based on its failed fibre proposal.

Federated Farmers vice president Don Aubrey said yesterday afternoon that fine wool producers should develop their own organisation and he is seeking support to hold a referendum with a view to develop one.

And he could have the support of Agriculture Minister David Carter who told NBR this morning the idea had merit.

Mr Aubrey said fine wool destined for use in apparel was in a category of its own and producers were well organised with a common strategy.

“I say yes to the collection of a levy that can be used to undertake industry good work for the benefit of all fine wool growers,” he said.

“Fine wool growers remain optimistic that their returns can be improved and I believe they are committed to make this happen.”

Mr Aubrey said he was seeking political support and he is consulting with other fine woolgrowers over the development of a potential referendum and industry good body.

“The organisation would focus on research and training and its funding would be held and distributed by a tightly focused group, similar to Merino Incorporated.

“Whatever shape the organisation takes, it must be lean and mean and under the firm control of the farmers it represents,” Mr Aubrey said.

Merino Inc operates on funds it received from the former Wool Board in 2003. It undertakes research, development, education and training in the merino sector with a focus on on-farm activities and fibre issues.

Mr Carter said he wanted to wait for a week or two for farmers to consider the implications of the no vote on the wool levy and then ask the major players in the industry to gather together for a meeting with him discussing the way forward.

Another player is Wool Equities, a company that was seeded with $24 million of farmer funded Wool Board cash in 2003 and has essentially spent it all following a biotechnology investment strategy.

A pro-rata share buyback closed yesterday. Depending on how much cash is left in the bank following the buyback, the company faces either voluntary liquidation or a major change in business direction.

From its inception, the board drove the company down a technology path and was hoping to make money out of wool proteins and peptides. This strategy failed and the company reported consistent losses.

This year it sold its only remaining asset, a wholly-owned subsidiary Keratec for $US800,000.

The board resolved that if more than $1.9 million remained following the buyback, then the company would continue on, albeit with a new philosophy based on investment in wool activities rather than biotechnology.

Wool Equities chairman Andy Pearce said he was hoping to make an announcement to the NZX either this afternoon or tomorrow morning and could not comment on what funds remained until auditors had completed their work.

However, NBR understands from a variety of sources that more than $2 million is likely to remain in the bank.

A meeting scheduled between Mr Cater and Wool Equities board member Cliff Heath along with other wool industry players was scheduled for early this week but was postponed by the Minister until next week.

More by Liam Baldwin

Comments and questions
2

What a total shambles every attempt to create some use for wool levy funds has been since the wool board stopped propping up auctions and evening out the the wool price for it's stakeholders.

Farmers know f*uck-all about where their product goes or why demand is created or dissipated. I'm a very practical man but when the auto gearbox fails on my car I take it to someone who knows.

If I try to do it myself and things go wrong, I'm simple enough to get angry and go looking for someone to blame. That's what the woolgrowers have managed to maintain for twenty years or so.

And we all know what happens to our smart brain when we are angry, right?

These wallies, collectively, have allowed their precious funds to be burnt up on hare-brained biotechnology schemes. Someone said "innovation" and they scrambled onto the bandwagon. Someone should have pointed out that a 1% chance to capture a new market with a new product is damnably expensive and not for those who can't afford to lose their money.

Someone should have asked "Why?"

They all lose sight of the simple fact that they produce a superb product that practically sells itself. But if you want to control the profits that flow back to you you need to control the channel: the auction system gave a rudimentary form of sell/withdraw control, but creating demand can easily be the most effective way to greater returns. Leaving promotion to those further down the channel means those who spent money promoting will expect to capture the rewards for themselves. There is no economic logic in expecting otherwise.

Wool is an incredible product that has evolved over millennia to protect a mammal that lives in temperate regions, doesn't shower or have access to dry cleaners.

The stuff has advantages that no amount of oil-based synthesis can duplicate as effectively or in combination with so many other factors. Amazingly, I have had the former Chairman of the Wool Board enthusiastically singing the praise of his polar fleece jacket to me. That pretty much sums up the psychological disconnect prevalent with woolgrowers.

Forgeting carpet, where the following principle is equally true, people always need clothes. Not all of them can afford them, and a tiny minority have the luxury of choosing what they wear and being able to pay for that choice.

Convincing a very small percentage of that tiny global minority that wearing garments that have advantages only occurring in wool will absorb almost all of our output and stabilise auction prices.

In future, highest quality contract growing has to be the national specialisation.

Merino NZ just made this work with a combination of shrewd politicking, quality product and business nous, in particular marketing skill.

When I read this sort of line: "must be lean and mean and under the firm control of the farmers it represents" I wince - what a recipe for disaster, blithe claptrap that carries the unmistakable hallmark of someone who doesn't know sh*t.

If the woolgrowers really want to see some improvement in their returns, and use their own money to do it instead of wasting it on whatever schemes some smooth-talker from Lincoln or Auckland comes up with, they ARE going to have to let go and trust the organisation that they select to create demand at the coalface.

NB, the coalface isn't where it's grown stupid. It's where it's sold.

I'd love to step in and advise them, but as far as collective intelligence goes, this industry is best characterised as a mob.

I see Wool Equities lost 22million dollars since 2003, any wonder farmers have had enough. The wool board or any other name given to spending farmers levy money has been a failure. There has been no accountability with these mobs of farmer parasites. A good dose of Zapp pour on has done the trick with the cancellation of their gravy train levy. Farmers can put money directly into the industry via say the Elders new scheme, leaving out the coffee drinkers.

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