Role of wool authority

Press, Volume CXI, Issue 32588, 23 April 1971, Page 13

Role of wool authority

It was becoming increasingly clear that the benefits from the establishment of a wool marketing authority would flow not so much from increased prices as from the ability of such an organisation to cut through the tangle of woolhandling methods, classing and specification, wool selling methods, transport and freight negotiations and in opening the way to a streamlined and efficient system from farm to factory, Mr L. P. Chapman, a member of the Wool Board, told a forum on wool marketing held at Ashburton last week.

Mr Chapman said that prices paid by consumers would not necessarily rise as the result of marketing changes and indeed might even temporarily go down. In support of this he cited the situation in Australia where the trade was uncertain in which direction the policy of the new Woo! Commission would go. It had always to be remembered that no amount of reorganisation, or overhigh reserves, or wishful thinking would enable wool to fetch more than the consumer was ultimately prepared to pay. However, Mr Chapman said he believed that marketing changes would help to lower costs and as well keep wool attractive to users in the textile field. Traditionally, he said that farmers had relied on free competition in marketing. Hence private buying had ■

developed alongside the auction system. This latter system had evolved as an orderly method with allocation of quantities, sale dates and accepted rules, together with the over-riding advantage of reflecting world values. Private buying had provided the stimulus of competition to the auction system, but the uncontrolled growth of private buying, from whatever source, could break down auction sales with chaotic results. : . ' - The WooL Board was Mt prepared to allow the auction system to collapse, unless or until a viable alternative system was found. Mr Chapman said that developments around the comer could be the establishment of a marketing authority, sample selling, objective measurement and national standards, one or two port loading in each island, single centre selling in each island or for

the whole of the country, and overseas the strengthening of the marketing function of the International Wool Secretariat and the extension of the growers’ influence beyond the auction. Wool would have to be marketed as a fibre in larger bulk quantities, classed and specified to a uniform description, and by an organisation capable of negotiating freight and other charges. It was essential to establish an authority with power to implement the reforms mid exercise the controls, that ware necessary. If grbwcis and all sections of the industry were serious about keeping the industry afloat and viable, then they Would have to forgo many of the individual freedoms and luxuries of the past, he said.'

A former president of the New Zealand Woolbuyers’ Association, Mr K. J. Fulton, said that acquisition of the clip offered tertain advantages to the grower, tart like all national systems of control was likely to prove costly in the long run This had been the experience of the British Wool Marketing Authority, whose handling and selling costs were prohibitive. The idea of selling direct to manufacturers had always appealed to growers because they believed this would cut out the middleman and result in higher net prices for the producer. But to self the whole of

the clip in this manner would require an army of salesmen and agents to cover the thousands of customers in 40 or more countries throughout the world. It would be a colossal undertaking for any one authority to carry out successfully and he feared that the costs would more than outweigh any savings. Since it was apparent that none of these various marketing systems could influence overseas prices over the long term, the net return to the grower must depend on the relative costs involved in each operation. Many of these costs were common to all methods of disposal and the same in each case. Those, however, which could vary were preparation and classing, handling costs in brokers’ or merchants’ stores and buyers’ remuneration. Of the latter Mr Fulton said he could assure them that it was the only one

which had not increased over the years in spite of ever increasing overheads. At the present level of wool prices the usual commission rate of 1J to 2 per cart was insufficient to cover the expense of maintaining an efficient buying organisation unless some trading profits could be reasonably assured, and during the past two or three years trading losses had more than outweighed profits in many instances. Of clip preparation prioi to sale, Mr Fulton said that the changing character of the clip and the emphasis bn use of these wools for carpets had shown the need for alterations in traditional methods of classing, which were unnecessarily costly for a large proportion of coarse crossbred wools. Economies could be affected by large scale bulk classing and blending establishments in each wool selling centre shared by all brokers.

Handling costs in brokers’ stores were a major expense borne by the grower and would continue to rise unless new procedures were adopted. An increase in lot size by grouping or blending and greatly reduced showing were measures currently under examination which should result in major economies. Mr Fulton said that the auction system remained the most effective method of disposing of the great bulk of greasy wool production, comprising hundreds of different types, for cash at prices established by free competition. “I am convinced that our existing system, properly handled, is the one most suited to the effective marketing of our clip. It has been evolved over a long period of time and

has served the industry well in good times and bad. Like any other system, it is not without its faults and must be adapted to suit the changing conditions of the industry.” Mr N. O. Thomas, general manager of the New Zealand Woolbrokers’ Association, also stressed the need for cost saving. Most observers in the textile industry considered ' that a significant increase in the price of wool was unlikely against the competition of other fibres. They were thus dealing with a fibre which was low in value and could not support high costs.

To obtain the best price from the world trade at the lowest cost to the producer, it was obvious that there must be planned development of marketing methods and he urged that interim measures should be taken now to ensure planned disposal of the New Zealand clip in the 1971-72 season. If the objectives of higher returns to producers and greater use of wool were to be achieved, then one authority must have the responsibility of moving the fibre into production, said Mr B. H. Palmer, chairman of the wool committee of North Canterbury Federated ■ Farmers, who admitted to “slowly going broke” under the present system of wool marketing. No nation, he said, could stand idly by watching a s2oom industry being operated in the mode of the 19th century and be expected to support the producers of the fibre. Mr Palmer said that provided the ownership of the raw fibre was initially in the hands of one marketing organisation improvement in efficiency in promotion and product development, in handling and in the sale of the fibre must increase the returns to the producer. The lack of communication between grower and processor had long been an obvious weakness in the wool industry. The auction system, he said, was most successful in camouflaging the true worth of high grade wools. Price per lb was an

unreliable indicator of user requirements and even of projected demand. A contact and observation group at the manufacturing end of the chain was urgently, required but it could function efficiently only if the grower had a central authority for interpretation of its findings. Direct selling as at present operated, tie said, was creating chaos. Shipments were badly described, contracts poorly executed, and worst of all weak sellers were undermining the price structure of the conventional auction system. Before expressing an opinion on marketing changes Professor W. O. McCarthy, professor of marketing at Lincoln College, said he would like to see the auction system compared with other alternatives on a cost-benefit basis.