I am a small-scale wool farmer and trustee at my local school, so the latest petition around our most failed commodity, strong wool, has left me wondering again about commodities and their risks and benefits.
Mates will attest that I am not a massive fan of sheep. I prefer cattle. Every time I look at sheep, they die or have a bearing. Because I am usually holding a drench gun when I’m with them, they are a good reminder that I am now middle aged. But, every spring and then again in autumn, I mutter to myself (whilst also cursing the harvesting cost) that this white woolen stuff is truly fantastic.
By beer’s end following shearing, there is collective agreement that this natural product taken directly from the sheep’s back is surely better than a petrochemical-derived synthetic nylon alternative. Surely my school’s floors would be better lined with Aotearoa wool than crude oil nylon?
My mistake here is thinking I produce a product and that nylon is the alternative. My wool is at best an alternative to synthetic polymers, with wool used in 10% of carpets these days, and demand is a far cry from the Korean wool boom of 70 years ago.
As I rummage through the papers on my desk, two documents tell our commodity story well. One is the school board paper. I review my local school’s balance sheet and find it to be as challenged as my own farm business for the year ahead. I think about my kids and their mates in our community and the fact that they’re in want of a music teacher, a playground, a teacher aid to keep everything together. How much more would our school be willing to pay for the ingredient in their carpet to be wool?
The other document is a carpet catalogue from our recent renovation. As an experiment, I kept my negative bias against the market-dominating synthetic option hidden from the carpet salesperson. The sales playbook was predictably focused on value, on durability, on colour, on cleaning, on price. It was carpet for sale, not wool. When I disclosed my interest in wool (but not my producer bias), the salesperson pointed out my slight winter sniffle and questioned whether allergies might be an issue with a woollen carpet.
My school board paper review and carpet-buying experience drove home the fact that if you are in commodities, you are providing a raw material, not a product. I produce strong wool, not carpets; 95CL bull beef, not hamburgers.
It also illustrates the need for economies of scale. With wool, the competitor is not wool from Peru or Scotland. The market leader is Chinese nylon polymers produced from Russian or Saudi Arabian oil.
We are talking about the biggest actors in a global economy, who exert massive economies of scale and invest significantly to create bespoke synthetic polymers perfect for carpet.
Our wool, collected naturally in the same way as 50 years ago, has natural variables that do not compete as a commodity ingredient. No matter how much we tell the “story of wool” as a commodity into carpet, we will struggle to stack up.
This rationale might suggest pessimism about our future with commodities, but I love producing a commodity and here is why.
I love that, notwithstanding commodity volatility, my commodity beef will sell. I know global demand means my cattle, here today, will be gone by Christmas, something mānuka honey producers might wish for.
I love that supplying a global commodity market (95CL beef), I am able to specialise on farm. Work behind the farm gate is hard; supplying a commodity market means I can “simply” use science and rational agronomic practices to continuously improve and get more from less.
I love that commodity products are the basis of our rural communities. Whether through co-operatives in the past or not (less so today), community cohesion is maintained despite the weather and markets.
We battle alongside our neighbour, we don’t compete with them. Certainly if I am successful and my neighbor is not, I will likely buy them out to achieve economies of scale (an imperative of commodity production), but that is usually far from our thoughts. Ninety-nine percent of the time, we help each other and we share.
I have enough challenges with my commodities. Fellow Eating the elephant columnists Dave Eades and Dan Eb will talk to the rewards of more risky business models. For now, the limited time and cash I have outside farming will be invested in my family, local school or native bush remnant.
We have choices about where we spend our time and money. I am a proud commodity beef producer, who next week will have new woollen carpets.