Coarse wool sector adopts global platform
THE struggling coarse wool sector is starting a global online sales platform like Fonterra’s fortnightly GlobalDairyTrade auction, having secured commitments of 6.5 million kg of fibre for its first year of operation.
Coarse prices have recently been slowly coming off more 30year lows.
Federated Farmers has welcomed the initiative, given the coarse wool doldrums of the past two seasons.
Shareholders in the Natural Fibre Exchange (NFX) online trading platform are Wools of New Zealand, the Alliance Group and Progressive Leathers Export, who are using CRA International, which designed and manages the dairy auction.
Wools New Zealand chief executive Rosstan Mazey said in an interview the NFX platform would draw on international models as an open access, independent trading platform and represented a crosssection of the wool market.
‘‘There are a number of inbuilt features to the platform that ensures the NFX is procompetitive, transparent and encourages fair discovery of prices for the fibre products traded between buyers and sellers,’’ he said.
The platform was designed to potentially include later all wool types and natural fibres, such as leather, cotton, silk or jute, if sellers wanted to come join, he said.
Coarse wool prices plunged last season when China switched from its strong wool preference to fine wool, causing stockpiles in New Zealand.
Mr Mazey said China was buying 60% of the country’s wool three years ago, but that was down to 40%, and the target buyer markets included the United Kingdom and Europe.
Coarse wool was used not only in carpet manufacturing, but also in upholstery and niche markets, such as bedding.
Mr Mazey said at present the platform is for New Zealand sellers, but could be extended to offshore sellers in the future.
He said setup costs were in the range of $200,000 to $300,000 but the majority of work had been ‘‘inkind’’, citing dairy platform manager CRA International.
When asked if the NFX had the backing to spend several years building up its clientele, Mr Mazey said sellers and buyers were already used to sector’s the auctioneering process.
‘‘I’m being optimistic that it’ll be a good uptake,’’ Mr Mazey said.
Federated Farmers outgoing Otago provincial president Phill Hunt said when contacted, while he was unaware of the new wool platform, he welcomed the concept.
‘‘Given the state of New Zealand’s coarse wool market at the moment, everything needs to be tried,’’ he said.
Prices for coarse wool, generally exported to China for carpet manufacturing, had plunged to lows not seen since the early1990s.
Mr Hunt noted that when he began farming about 50% of his income was wool, but that had since fallen to ‘‘well below 10%’’ and proteinproducing sheep were now the emphasis.
He understood prices were so low last season a glut of coarse wool developed in woolsheds, but farmers had since resumed selling from their stockpiles.
ASB rural economist Nathan Penny also welcomed the initiative, saying it was ‘‘key’’ that the platform was offering transparency in prices, so sellers and buyers know exactly where they stood in the market, and what they would base new contracts on.
‘‘There’s been a tickup in [coarse] wool prices in the past few months, but its fairly modest. Other types, midmicron and fine, have held up better,’’ he said.
His only caution was that it could take years for the auction to become established and unlike the dairy sector, coarse wool had a more limited market and buyers.
AgriHQ reported wool shipments to China for the first half of the 201718 season, from July through December, had lifted 27% on a year ago, although average shipment values to China were down 15%.
Mr Mazey said the platform was an evolution towards developing the most efficient means of selling significant volumes of wool, he said.
‘‘Buyers in turn can compare all prices in real time with all parcels of wool available simultaneously over multiple rounds of bidding,’’ Mr Mazey said.
There is no buyers’ fee but there is a sellers’ joining fee, then a fee per kilogram, which ranges from 3.7c to 5c, for greasy tested wool, scoured tested, slipe wool; tested or untested and greasy untested.
The first live trading NFX auction is scheduled for May 22, at 2pm New Zealand time, then Tuesday fortnightly.
The bidding site is opened two days before auction. Sellers set reserve prices and any restrictions on buyers.
All wool parcels would be offered simultaneously over multiple rounds of bidding, with buyers winning on the highest price offered.
Mr Mazey said NFX had initial commitments of about 6.5 million kg for the first year, including from Wool New Zealand, Alliance and ‘‘most major producers’’ of slipe (chemically removed) wool.
‘‘It’s early days and discussions are being held with other major sellers and buyers,’’ he said.
Initially, the focus would be on securing support for greasy wool, with potential to develop other offerings in the future, he said.
Alliance’s head of strategy Nigel Jones said it was keen to explore any opportunities to improve price transparency and wool growers’ returns.
❛ Given the state of New Zealand’s coarse wool market at the moment, everything
needs to be tried