Wool revamp backing likely

By PHILIPPA STEVENSON agricultural editor

Woolgrowers appear likely to endorse the reform prescribed for their ailing industry in the $3 million McKinsey report and Merino growers could have the first new-look business out the barn door.

Voting in a grower referendum on the McKinsey recommendations for the $1 billion industry closes on Wednesday.

The do-or-die tag on the plan suggests farmers have little option but to back the radical reform - bringing about the demise of the Wool Board - despite unease about accepting the 10-point package without amendment.

The country's biggest farmer, Landcorp, has come out in favour of the plan and urged the speedy establishment of new commercial wool marketing companies for carpet and apparel wools.

Landcorp chief executive Neil Prichard said it was critical that the new organisations quickly produced strategies and business plans before growers were asked to commit to financial decisions on capital structures, levy funding and use of Wool Board reserves.

"Landcorp produces about 3.5 million kilograms of wool each year, mainly strong wool. The proposal to establish a new commercial wool marketing company for strong wool, with both grower and non-grower shareholders, deserves full support."

Mr Prichard said there should be significant advantage available to growers from supply through a substantial commercial company focused on improving contractual relationships with major carpet and rug manufacturers.

And at the Merino growers' annual conference in Christchurch on Friday, there was a strong mood for change among the fine-wool producers who got their first sight of a new-look commercial structure supported by the Merino NZ board.

But Merino NZ chairman John Perriam said that while his board endorsed the McKinsey recommendations it was also keen for different wool groups to have a further vote on how they would implement the changes.

Merino growers had concerns about McKinsey's recommendations on the time allowed for transition to the new structure, and the axing of levy funding. McKinsey recommended that levy funding of Merino New Zealand cease after July 2001.

"If we're rushed into making major commercial decisions there is a higher risk of failure," Mr Perriam said.

Chief executive John Brackenridge said that if levy funding was dropped in the transition to a commercial company, Merino New Zealand would have to dump programmes it could ill-afford to lose.

Some 500 fine wool growers at the conference were polled for their views on the direction of Merino NZ, the suggested commercial structure dubbed Newco, and their support for levy funding past next July. Results are expected on Wednesday.

Frank Wilson, the managing director of British knitwear company John Smedley and a keynote speaker at the conference, said his company might be prepared to be part of Newco as an extension of the profitable relationship already established with Merino growers.

Mr Brackenridge said Newco would be an integrated fibre management company acting as a hub between growers and the market, providing the linchpin for alliances with "anchor tenants" such as brokers, top makers, spinners and weavers and retailers.

Growers would own the largest share of the company through their own investment entity, which would continue the advocacy and lobbying roles now undertaken by Merino NZ.

The reaction from brokers to the structure had ranged from "quandary to quite constructive," Mr Brackenridge said.

"It's practical to work cooperatively rather than go to war [with brokers] but we also value their knowledge and experience.

"Their backs have been to the wall and they are running pretty efficiently."