Prime Movers sector report: Wool

The wool industry was once New Zealand's premier industry but is now fighting to survive and the once mighty Wool Board is about to disappear. Agriculture reporter JANET TYSON reports on one man who, despite the upheaval, has faith in wool.

James Falloon has devoted his working life to producing wool of the highest quality. The Coopworth sheep on his Wairarapa farm have been selected for the whiteness of their wool, as well as for fertility.

They are shorn on an eight-month rotation, designed to maximise wool quality, and the fleeces are handled with great care in the shearing shed to keep the wool free of any dirt.

At up to 41 microns, it is at the strongest end of the fibre spectrum, more than twice the thickness of fine merino, and despite the care taken in its preparation, it will sell for around $4.50 a kilogram, a third of the price merino fibres fetch.

Merino wool is a niche that is being exploited through the integrated marketing group New Zealand Merino. Pure white Coopworth wool is ideally suited to another potentially high value niche - hand-woven designer rugs that would be snapped up in the United States or Germany. In the absence of any effective wool industry structure to market the fibre, Falloon's quality Coopworth clip is being sold as a commodity.

"If I specialise my farming system to produce excellent wool, there are no market signals coming back to confirm what I am doing."

Like most woolgrowers he knows, Falloon rings up five or six wool buyers, lets it go at the door for the best offer, "and that's the end of it. I don't know where it goes. I just sell it and it disappears." At the scour, it's probably mixed with wools of lesser purity.

Falloon runs 7000 Coopworth ewes and 3000 hoggets, on 1200 hectares. After a good winter, he hopes to finish lambing with even better numbers than the expected nearly two lambs born per ewe - or a high lambing percentage of 190 per cent - indicated by ultra-sound scanning.

The farm is "close enough to Masterton that the fish and chips are warm when you get them back home", and partly because of this he hasn't faced problems staffing the farm since he increased the scale of the business by buying out his brother's 18 months ago. For many people, finding labour is the biggest hurdle to increasing scale.

Falloon, 44, began farming when wool was king. In the late 1980s, at $10 a lamb and $5-6 a kg for wool, half his farm income came from wool. Today, at upwards of $60 a head, the lambs he sells to finishers account for 65 per cent of farm income, his beef cattle contribute 20 per cent and wool 15 per cent.

While world prices for lamb have soared - backed by improvements in meat quality - wool prices have slumped, regardless of quality. On many farms, the wool contribution could be even less.

As a result, fewer and fewer farmers are prepared to pay the costs of a commitment to wool quality.

"A lot of farmers have gone soft on wool now," Falloon said. "They see it as a byproduct. Wool grows, you have to get it off, but their focus is on lamb production, on fertility and growth rate. That's fine and that's profitable for them.

"My only worry is that unless you are extremely careful, the side effect of the meat focus is detrimental to the wool."

Management for meat productivity means sheep are fed very well and will grow more more wool, which is likely to be stronger and may include colour faults such as black fibre. When the main purpose of shearing is also as a management tool - for instance mid-pregnancy shearing for the benefit of twin-bearing ewes - extra care in the woolshed is seen as an unnecessary extra cost.

All Falloon can expect for his investment in quality is a small premium from the successful buyer. "Quality always sells, if it is known, and over time the premium mounts up.

"You are either a niche marketer or a commodity seller. If I have to be a commodity seller, I'll be the best commodity seller."

At the same time he is putting time and energy into working out how he can develop a much more lucrative market niche for his wool. With its high lustre, Coopworth wool can pose problems for spinning machinery.

But it's ideal for hand-woven rugs, and Falloon has successfully sold his wool to Tibetan craftsmen in Nepal. After logistical problems, that venture has gone on hold, and a possible new niche project is in limbo at the moment.

He knows how much blood, sweat, tears and shoe leather goes into developing a new market niche. Until the trade was "knocked on the head by cheap lamb from Uruguay", he was selling his own beta (very lightweight) lambs to Spain. He remains involved in meat export as a director of niche exporter Lean Meats, which is at last reaping the rewards of more than a decade of hard graft. And he thinks that compared to marketing wool, marketing meat is a breeze.

A self-confessed optimist, he is one of the few farmers at present prepared to put their heads up and back the future of strong wool. The ground is littered with failed attempts to put together a workable marketing structure. "Some good people gave it a try and they didn't deserve the sort of treatment they got."

Some years ago, he watched one of our wool marketers with some architects in New York. He opened their minds to the possibilities of wool. "They were planning to put nylon carpet in an environmentally friendly building - they didn't even know that wool was fire-resistant.

"They would never pick up that sort of information by reading it. You need someone to tell the story of wool with passion."

For that reason it wouldn't worry him too much if New Zealand ended up with only a few specialist wool producers.

"A lot of farmers are not passionate about wool at all now. We don't need people who don't worry about things like black fibres, which could drag down our overall image. New Zealand has always been known for white, clean wool."

For this reason, his main concern is that the baby of the Fernmark Quality Brand isn't thrown out with the bath water of bureaucracy and politics when the Wool Board comes to an end. "Farmers had invested billions of dollars in it, and it was working.

"Wool Interiors now has the responsibility to keep that brand alive. Who knows, they may shock us. I hope they do."

At the September 19 wool sale in Christchurch the indicator price for strong wools was $4.52 a kg, up 10c on the previous sale. Medium micron wools were up 18c to $8.16 a kg, and fine wool prices up by 59c to $14.47 a kg.

Wool Interiors is the joint venture brand and technology company launched this year by the Wool Research Organisation NZ and Wools of New Zealand with the goal of adding value to the carpet industry from research and development, product development, and brand marketing. It reports that 94 international carpet companies will contribute a total of $65 million to promotion of New Zealand-branded carpets.

Wrightson continues to work on what it has said will be its last attempt at contributing to wool market reform.

Facts:

Export value: $1 billion

Wool volume: 260 million kg

Key markets: China, Britain, India

Number of farmers: 16,800

Major areas: nationwide

Area farmed: 9 million ha

Further reading:
nzherald.co.nz/primemovers