Sunday, July 3, 2022

Shock tactics needed to save wool

Strong wool producers need to be scared into investing in the Wools of New Zealand share float for the good of the industry, says North Canterbury farmer Hugh Robinson.

CAPTION: WAKEUP CALL: Mark Shadbolt says New Zealand woolgrowers have the best wool in the world but do not appreciate the strength they could have in the industry if they adopt the right strategies. Photo: David Alexander

“If we don’t go with this then customers could be left to thumb it and we find we’ve lost out to a sea of synthetics,’’ he said at the first, and sparsely attended, WoolsNZ capital raising roadshow at Culverden on Thursday morning.

Only five farmers were there but there was some encouragement for directors, who have really just counted on applications for shares from about half of the 4000 farmers who have at some point paid voluntary levies to fund WoolsNZ’s strategy and market development.

Of the five at Culverden, only one had been a voluntary fee-payer, but all said afterwards that they were strong supporters of this capital raising.

After the meeting, Robinson said he had not paid the fee in the past because he had been disillusioned by the WPC co-operative plan in 2009, which had made it compulsory for farmers applying for its shares to supply all their wool to the group, but eventually did not raise enough capital to proceed.

WoolsNZ has taken a different approach, allowing farmers to continue with their existing wool procurers, and working through several export companies.

It wants to use its international brands, industry partners and technical expertise as the basis for contracts bringing together the supplier and overseas manufacturers and retailers, without duplicating existing resources.

Staying with his current procurer company was important, Robinson said.

“I’m a strong supporter,’’ he said of the share issue. “We need to do this, otherwise we’re near the end of a long straight and heading to the top of the cliff.’’

If WoolsNZ wasn’t “beavering away’’ overseas for farmers then no-one was.

The meeting was the first of 46 scheduled by WoolsNZ directors in their promotion of the capital raising, aimed at issuing at least $10 million worth of shares, with the minimum to be raised for the business model to proceed being just $5m by the December 14 closing date.

“There’s no Plan B if this doesn’t work,’’ chairman Mark Shadbolt said. “No extension.’’

Farmers can buy one or more shares for every 2kg of strong wool they produce. A $10m raise would line up 20 million kg, about 17% of the clip.  The minimum subscription is $5000.

One farmer was concerned how he would get his money back.

The constitution allowed for shares to be transferred between woolgrowers, and the company could operate a register for buyers and seller, WoolsNZ director Craig Hickson said.

WoolsNZ intended to pay dividends, though this would not be within the first five years of operation, and shareholders should benefit through capital gain on the shares, and from value benefits through wool contracts.

The company already has contracts on about 1 million kilograms of wool and an overseas party keen to do a contract on between 2m and 4m kg, Shadbolt said.

Though wool price levels were too low to be sustainable for the industry, New Zealand woolgrowers had the best wool in the world and did not appreciate the strength they had in the industry if they adopted the right strategies.

Overseas buyers were worried about wool quality and quantity, and getting enough wool, and they wanted to link with growers, he said.

Hickson, a major investor in several NZ meat processing companies, told farmers he was involved in WoolsNZ because better prices were needed to ensure a viable sheep industry.

Lamb meat prices had already achieved “top price’’ in overseas markets and it was becoming increasingly difficult for lamb to support the industry on its own.

The wool price had not kept up. “Wool won’t change unless we change it. Existing players ride the wave, but don’t appear too concerned if the industry is up or down.’’

As a sheep and beef farmer in Hawke’s Bay, Hickson qualifies to be a shareholder. “Beef, lamb, and wool, we need them all to be strong,’’ he said.

 

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