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Review to Australian selling system due soon

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Australian Wool Innovation has initiated an independent review of Australia’s wool selling system after instability in the wool market, particularly at the fine end.

According to AWI, the objective of the Wool Selling Systems Review is to improve the returns that wool growers receive. The review aims to determine whether the current exchange of ownership between sellers and buyers provides the best possible competition and financial returns to primary wool producers.

There seem to be no shortage of views and no shortage of submissions from all sectors of the wool industry. The report indicates that over 70 submissions have already been received.

‘Too much wool is being sold on a spot basis and this creates a lot of volatility. There is no forward commitment to wool as a fibre’, according to Jonathan Lillie managing director of Melbourne based company Fox & Lillie. ‘Wool prices are fashion reliant’, he says.

‘The auction system has been the predominant method of ownership transfer and price discovery in Australia for about 130 years,” he said. “With current production levels at 328 million kilos and where it sits as a percentage of the international textile market, I think it’s got to be called a niche product.

‘Our company now buys a lot of wool directly from farmers, it by-passes the auction, sale by negotiation, I think there’s room for that to get bigger in Australia. I feel as though it creates a greater appreciation for the wool, the attributes for the wool can be looked at and hopefully factored in to the price they get for that as opposed to the auction commodity type selling.’

There has been some criticism. Rob McBride chairman of Australian Wool Growers Association has been reported to say that ‘AWI is not achieving its marketing goals and this review of the wool-selling system is an attack on Australian wool brokerage’.

Some exporters have expressed the view that there is little point in changing the existing system just for the sake of change. But a majority view suggests that a selling system that is as open and transparent as the present auction system, that can sell with the speed and economy of the present system, this would be something to consider.

On the whole, the Australian wool industry believes that the grower must be able to generate better return for his wool otherwise the industry will continue to shrink.

Some sources suggest that the review is considering a great use of electronic technology to facilitate better online selling. It is also possible that the review may recommend consolidation of selling centres and bring it to one central point, in Melbourne.

Although AWI has initiated this review it intends to remain at arm’s length from the review process. The steering committee comprises Fox & Lillie managing director Jamie Lillie, former head of Australian Competition and Consumer Commission Graeme Samuel, founder and chairman of Bell Financial Group Colin Bell, former Federal Department of Agriculture secretary and former member of the Productivity Commission Bernie Wonder, Will Wilson, who was heavily involved in the merger of the Sydney Futures Exchange with the Australian Stock Exchange, and executive officer duties will be handled by John Roberts (lately of Dalgety).

 

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