Farmers' wool company clipped

By PHILIPPA STEVENSON agricultural editor

The farmer-inspired Growerco plan for a cooperative wool marketing company has been abandoned after six months and $500,000 in costs.

Growerco chairman Sir Brian Lochore pulled the plug on Friday, citing lack of farmer support.

"Apathy, a reluctance to make decisions and the inability to look into the future are fundamental problems in the wool industry, particularly among growers," he said.

Growerco's departure leaves the field to rival proposal OneWool, a consortium of Wrightson, carpet-maker Feltex and the 380-grower East Coast Wool Co-op.

Growerco surfaced in June after Wrightson's decision the previous month to pull out of negotiations with the Wool Board to form a company to buy and sell New Zealand's 150,000-tonne strong wool clip, a recommendation of the $3.3 million McKinsey industry restructuring proposal.

Growerco estimated it would need at least 50,000 tonnes of wool a year.

"Despite extensive advertising, spending two weeks travelling around the country talking to growers and writing to every wool grower in New Zealand, we got a mere 12,000 tonnes firmly committed by just over 1100 growers," Sir Brian said.

"Although there were indications of stronger support, there was still too big a gap to what we needed for Growerco to succeed.

"Despite the overwhelming grower support for the McKinsey strong wool recommendations, it's disappointing that so few growers were prepared to back a proposal that would have delivered the reform the industry needs."

The McKinsey implementation project team recommended that the Wool Board support Growerco because it represented a wide group of grower interests, was national and would implement the reforms proposed by McKinsey and supported by growers.

Sir Brian said developing Growerco cost the Wool Board $491,000 "with a few invoices still to come in".

Growerco recognised it would be difficult launching a company before Christmas but did not want to waste time.

"We needed to gauge support for issuing a prospectus. There's clearly not enough, so it's time to call it quits."

OneWool consortium chairwoman Mavis Mullins said Growerco's decision showed how difficult it was to achieve an industry-wide solution.

The two proposals were quite different, she said. Growerco's proposal was based on influencing value through volume, but OneWool rejected that option.

"OneWool generates value through processors of carpets and rugs receiving fit-for-purpose strong wool that is grown and supplied to their specific requirements," said Mrs Mullins.

"Our vertically integrated approach is not an industry-wide solution. It is a commercial operation that mutually benefits participating processors and growers."

OneWool would begin operation soon, she said.

Sir Brian said growers must drive industry reform.

"Reform of the industry needs to be based on a new selling system. The wool industry doesn't need another broker or exporter, and it must get away from trading on the spot market and taking a first-price mentality.

"Extra value can only be achieved through participation in the value chain. Growers need to move away from the spot market and embrace a new payment system that will reflect that participation."

Reform had been achieved in the meat industry, but wool was 10 years behind.

Sir Brian said established players who opposed Growerco were simply trying to protect themselves against the inevitable.

"Our cause was not helped by the confusion of plans in the industry. Vested commercial interests, rather than a genuine grower-led attempt to reform the industry, drove competitive responses by others entering the market.

"Any effective, reforming business needs to be a global marketer along the lines of Fonterra or the large meat companies, which can take all the product farmers supply and market it around the world.

"Growerco could have been that business. It's just a pity that more growers could not see that. I hope a grower-based, global wool marketer does emerge.

"It is the only hope for our industry, and would prevent a world-class fibre becoming a nuisance byproduct of meat production."