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Home / Business

Wool board on last step to extinction

20 Oct, 2002 07:23 PM4 mins to read

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By KEVIN TAYLOR

Wednesday's Wool Board annual meeting in Invercargill will be the last in a history that spans almost 60 years.

The final meeting will be followed by a half-day conference on the industry's future, which is set to follow a path broadly laid out in a key report in
2000 on improving woolgrower profitability.

The McKinsey report sparked two years of debate, referendums and reform.

In May a key referendum of woolgrowers supported the reform process, including an end to the Wool Board from June 30 next year.

By late next month a bill dissolving the board and making the most far-reaching changes in the industry in 70 years should be introduced into Parliament.

The Wool Board Restructuring Bill is expected to come into effect on July 1, winding up a body that has existed since 1944.

The reform process and structures being created are complex, but the aim has been simple, says board secretary and general manager of policy, Roger Buchanan.

He says the industry is getting out from the umbrella of a statutory organisation, and putting things as much as possible into market-driven commercial structures.

"And growers can participate in that commercial structure as they choose.

"It is basically moving on from the producer board model."

Various structures have been and will be springing up to ensure beneficial activities continue, including research and development.

The Wool Board's job has been to develop industry strategy, provide information to industry players, and collect levies to finance various programmes.

Four business entities have operated, co-ordinating work in wool production, research and development, technology transfer and international marketing.

Buchanan says that as a first step the law reform will corporatise the board into a leaner entity to distribute the board's assets.

Board reserve funds, which stood at $109.1 million in June last year, are being gobbled up by the restructuring costs.

Its net assets this June were down to $79.5 million, and are forecast to drop to $67.3 million by next June.

The slimmed-down body, dubbed Disestablishment Co, or DisCo, will transfer the board assets, take responsibility for contingent liabilities, and have the power to continue raising a levy for industry-good activities.

But that levy will continue only until such time as SheepCo - another body recommended by McKinsey - starts its levy.

SheepCo is a non-profit organisation set up last year to pay for research, industry training and market development.

The assets of the board will be allocated as shares to woolgrowers who farm more than 250 sheep.

Each grower's allocation will depend on how many sheep they farm.

About $34 million to $35 million will be transferred to growers as redeemable preference shares in two companies, Wool Equities and Merino Grower Investments. Growers will also get ordinary shares in both.

They will have the option of converting the redeemable preference shares for the full value or taking further equity in the companies.

But Buchanan says that with an estimated 16,000 woolgrowers the distribution will only amount to close to a dollar per sheep.

"With an average sheep farmer who might have 3000 sheep, this is not going to pay off their mortgage or make them particularly rich."

The restructuring is about the industry's future, not a cash distribution.

Wednesday's conference, "Looking to the Future", will take place after the annual meeting.

It will include addresses about the future vision of the new organisations by those who head them - Sheepco chairman Mike Petersen, Wool Research Organisation managing director Dr Garth Carnaby, Ovita chief executive Damian Camp, and Meat and Wool Innovation chief executive David Bremner.

Meanwhile, a board-sponsored history is being written on the wool industry. Buchanan says it is likely to be published around the middle of next year.

The Wool Board story

1944: Wool Board formed.

1952: Wool Commission established, operating guaranteed minimum price scheme while the board runs promotional activity. Commission gets profits from sale of wool stocks built up during World War II, creating a capital reserve.

1972: Commission becomes the Wool Marketing Corporation.

1977: Wool Board merges with corporation, with the passing of the Wool Industry Act.

1997: Major revision of the old act, removing some Wool Board powers.

2000: McKinsey and Company, asked to report on how woolgrower profitability can be improved. Releases an extensive paper on restructuring the industry, including dissolving the board.

2001: Wool Board annual meeting details how McKinsey recommendations are to be implemented, including board's own dissolution.

June 2002: Grower referendum shows resounding endorsement (98 per cent) for dissolving the board.




www.woolboard.co.nz

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