Producers given reality check on wool

The bottom line is the world doesn't need our wool was the reality check from Australian Wool Network (AWN) managing director John Colley at the WAFarmers wool section conference last week.

And now that China dominates the commodity's processing uptake, including 71 per cent of the Australian clip worth $2.24 billion, Mr Colley said global wool marketing had never been so important.

With wool's share of the total world fibre usage at only 1.7 per cent, he said we must be diligent on massaging the consumer psyche.

"They must want the product, especially when it is many times overshadowed by a cheaper synthetic alternative," Mr Colley said.

"In the past we have failed at marketing wool."

He said it was still uncertain if the current Australian Wool Innovation global marketing campaigns were paying dividends.

But he was certain that the natural fibre's sustainability would be derived from the purchasing power of the emerging wealth in Asia.

Mr Colley said the challenge for the entire industry was to lower the cost of production across the board; from the grower to the processor.

While the Australian agriculture labour force continues to be denied a fair go because of the lure of the rich mining industry, he said increasing costs in the processing sectors were also detrimental to the industry.

"Italy's specialist weavers and spinners at the high end still create a premium under the 'Made in Italy' label, but are finding it difficult to compete with China on a cost basis.

"The Italians had to reduce their wool consumption by 50 per cent at every level over the last five years."

He said that in the near future, Italy's 30 plants would be reduced to only a few.

"There is very little first-stage wool processing left in Europe." he said.

Before Mr Colley built his vertically integrated wool brokerage business, which turns over $400 million annually, he lived and breathed Merinos at his family's sheep farm and spent a stint in Italy working at the likes of Ermenegildo Zegna, Loro Piana, Schneider and Marzotto, learning every aspect of the trade.

He said Italy's processors were the leaders in mechanisation and by simply the push of a button; an order of fabric could be processed and made ready for delivery.

However, Mr Colley said China's dominance in the processing sector was re-writing the rule book.

"Chinese wool buyers collaborate after the first wool bale price becomes common knowledge, which results in a manipulated market without any consideration on sustainable values," Mr Colley said.

He said it was important to educate Asia's wool buyers of the ever increasing costs that burden Australian woolgrowers.

"Today's wool prices are at all time highs in $US terms, but values are still not that good when inflation is taken into account."

Mr Colley said it was difficult to predict where Chinese demand for Australia's commodities would lead.

"The growth in China has only really taken off in the last 30 years, it is still young and vulnerable," he said.

He said the trade of wool to India had expanded as the competition has sorted out the unscrupulous players.