[As published in July/August BayBuzz magazine.]
WoolWorks has placed a $50 million bet on the future of wool, not just in Hawke’s Bay, but New Zealand as well. Yet the wool industry is not in great shape right now. Arguably, it hasn’t been since the 1950s. From 70 million in the 1980s, sheep numbers are now about 24 million.
So what does the future hold?
In researching and talking to people about wool in recent weeks, the boom times of the Korean War come up regularly. People accept those times won’t come again, but they have more trouble defining why.
For some, it’s the supply chain that takes wool from the farmgate through to consumers that’s broken. Others believe wool is not being marketed well enough. Apparently there are consumers in the Northern Hemisphere who can save the New Zealand wool industry. Only people have trouble identifying exactly who those potential consumers are and how to sell wool to them.
By ‘wool’ it’s important to note we’re talking about strong wool. It’s sometimes referred to as coarse wool as well. It’s your common variety wool, which New Zealand has been renowned for, rather than your finer merino clip. That’s a whole other ball of yarn in itself.
Who’s clipping the wool coupon?
Strong wool prices went up in the last few weeks, to $3.37 a kilo.That’s up from $2.58 in June 2022 and $2.76 in June 2023.
“But it costs around $6 to shear a ewe, so you don’t even cover your costs,’’ says Anthea Yule, Hawke’s Bay provincial chair of Federated Farmers meat and wool industry group.
She’s been farming in this region since 1987 and says farmers are largely shearing for animal health reasons, given there’s no money to be made from the clip.
However, at the other end of the supply chain, wool has increasingly become a luxury item.
“If you want to buy your child a singlet, you’ve got a choice between a pack of four made of synthetic and plastic for $20 or you can buy one woollen one for $30. That’s the reality on the ground,’’ Yule says.
Kara Biggs accepts that. She’s general manager of the Campaign for Wool, that’s emerged in the vacuum created by the disestablishment of the old New Zealand Wool Board.
The Campaign for Wool is about education, advocacy and marketing on behalf of wool growers. “We need to make sure we’re talking to the right people,’’ Biggs says.
“Within New Zealand wool, we are not talking to the people who go and spend their money at Kmart. We’re just not. I get it that some people need to shop at Kmart. We all do from time to time, but wool actually isn’t for everybody and we need to be really clear about that.’’
So who is the industry aiming to reach and what are the obstacles?
Different views of the challenge
WoolWorks, which operates a scouring business from premises in Awatoto, Clive, Timaru and Australia, seems to have some idea of its audience and market.
“We’ve spent the last 20 years right-sizing and getting the early stage wool processing in New Zealand into a restricted model that’s actually globally competitive so, without what we do, there would be no wool industry in New Zealand,’’ says Nigel Hales, WoolWorks president.
“Growers obviously made a decision a few years back to dissolve the Wool Board, but there’s been no grower input of any substantial nature since then and we could all have an opinion on that. But while some parts of the sector were going backwards, we read the tea leaves quite correctly and have right-sized the industry now to less sheep numbers so we can compete internationally.
“What that means for the farmers is that if they want to set up doing other things and adding value to their wool clip, then they’ve got the most perfect opportunity to do so.’’
Hales and chief executive of WoolWorks’ new venture division, Rosstan Mazey, spoke to BayBuzz from Santa Monica. From there, the pair were going to Uruguay and Chicago, meeting with industry partners, assessing equipment and trying to add strings to the bow of a business that already washes 80% of New Zealand’s wool.
Hales says WoolWorks intends to always stick to its knitting, which is scouring wool. But they are forever on the lookout for alternative methods of using the fibre, whether that’s as wool grease or in the building or furniture industries.
There’s a view that not all growers recognise the part they need to be playing in all this.
For wool to have a future, the consensus is that it needs to be a premium product that garners premium prices. But if growers keep blithely doing things the way they’ve always done, then that won’t happen.
“No, I don’t agree with that. Not at all,’’ Yule says. “I can see how some farmers have got fed up with it. You know, when something’s worth nothing it’s very hard to rally round and present it correctly. I think there will be some farmers who’ve taken their eye off the ball because it’s not worth as much, but it’s not correct to blame farmers.
“We feed our sheep well to grow good wool. The marketing of it has been terrible and the auction system. People have gotten away with paying very little for years and I think some of our wool brokers, our wool buyers, they have their fixed costs but they’re actually taking more than they used to. They have their fixed costs, but wool’s worth less. So they’re not getting as much, but they’re still taking more off the farmer.’’
Not surprisingly, independent wool broker Phillipa Wright is not of the same opinion.
“I’ve heard that comment – and I’ve probably made it myself at times of frustration – but it’s a terribly naive and simplistic statement,’’ she says. “At the moment the exporter, which we call the buyer, they’re traders. Yes, they’re buying it as cheaply as they can and they’re trying to sell it for as much as they can.
“But, at the moment, the auction system is actually financing the industry. There’s no other commodity that I know of that is guaranteed payment within a fortnight of sale.’’
The supply chain
Tim Deane, owner and managing director of Norsewear, and Progressive Meats founder, Craig Hickson, each have stories that exemplify some of the supply chain issues that appear to be hampering the industry.
Deane bought Norsewear in 2023, having been a senior executive at ASB Bank, Goodman Fielder and Fonterra. He had an idea how commodities were produced and sold but found wool a bit of a surprise.
“My first step was understanding where the wool came from for my work socks, because I have to buy worsted spun yarn,’’ Deane says. “Because we don’t have any worsted mills at scale left in New Zealand, the NZ wool has to be shipped to Asia or India, scoured, turned into tops, turned into yarn and then I have to buy the yarn back in US dollars.’’
Hickson has worked in the meat industry since 1981, but is also a director of Wools of New Zealand.
“In my own case, I grew my own wool. Well, a farmer had the sheep and they were a Poll Dorset-type cross, they had a bulky nature to them and it was in the low 30s in its microns and it was suitable for carpet and I had to re-carpet my house,’’ Hickson says.
“So I had it shipped to Timaru to be scoured and then it went to Christchurch to be spun into yarn and then it went to Melbourne to be made into a carpet. Then it came back to Auckland via ship and then it was trucked to Hastings and laid in my house.
“It cost me, in the end, about the same amount as if I’d bought the carpet, except I got a heavier weight. I got in the 70-ounce range, as opposed to what I probably would’ve bought in the 50, 60 range. I did it for educational reasons, just to try and understand what the steps were and also what the costs were of going through that value chain.’’
At the end of it, Hickson came to a pretty clear conclusion. “At the farmgate, you’re pretty much a price taker and the negotiating power rests with the parties in the layers beyond that.’’
In other words, the grower is paid a pittance and the end consumer is charged a fortune because of all the people clipping the ticket in between. If you got rid of wool brokers, and the whole auction process, and could contract directly to, say, Norsewear, growers would get a fairer price. That’s certainly the model Deane is in favour of.
“They’re not going to cut my side out,’’ says Wright. She’s run Wright Wool for decades, but done plenty else in the industry besides.
“I’m a service, so wherever the wool goes it has to be weighed, it has to be tested and the ownership has to be registered back to the grower who supplied it. The system that we’re using from farm to boat has got no consequences to the price at the other end. The farmer gets 80% of the value of their wool.
“When they talk about ‘clipping the ticket’ that’s after it leaves our shores, because then it’s really processed. Here nothing happens to it, it just gets prepared for sale and washed.
“It’s very simplistic to say everything we’re doing here is wrong. Changing what we do from farm to boat isn’t going to make any difference to the price of New Zealand wool.’’
That’s a vexed issue in itself.
Both Yule and Hales believe that if farmers got 2018 prices of $6 or $6.50 a kilo for their wool they’d, in Hales’ words, be “in the pink”.
But Wright sounds a note of caution there. Home insulation is seen as something of a silver bullet, with wool increasingly being used in that regard. “But they’ve never been able to get wool for as cheap as it is. So, at the moment, they’re getting it for less than $2,’’ she says. What happens when it goes to $12? How are you going to compare to Pink Batts then? If it succeeds, it’s going to be that you and me won’t be able to afford to buy it.’’
Better marketing needed?
In the end, New Zealand isn’t the market for this country’s wool.
Strong wool across the globe, Wright says, is struggling. In the United Kingdom, for instance, she says growers get a lower price for their wool than ours do.
But she’s adamant New Zealand’s strong wool is by far the best and that it just needs to be sold better. Lots of people talk about “the New Zealand wool story’’ and how it’s not being told properly or by the right people.
“All of a sudden it’s become my job and the scourer’s job and the exporter’s job and the merchant’s job; everyone’s expecting us to be these grand marketers,’’ says Wright. “We’re not marketers, we’re service operators.’’
That’s where the Campaign for Wool comes in.
Until now, it’s concentrated on initiatives such as Wool in Schools and educating people on the benefits of wool as clothing, carpet and as a building material. Actor Sam Neill, complete with his 625,000 Instagram followers. has come on as a brand ambassador for the Campaign for Wool, in an effort to sell our wool story to a global audience.
Wine and increasingly whisky market the notion of terroir or provenance to consumers. Here’s where these grapes or this barley were grown, here’s the people who grew it, these are the natural ingredients that go into our clean, zero-carbon, ethical and sustainable product.
“If we position our wool properly, New Zealand’s unique selling proposition is the incredible quality of our wool,’’ says Biggs. The hope is that Neill then helps nudge the overseas target market in the right direction. “We can try and convert people who are never going to buy wool, but that’s actually really costly. So what we’re better to do is to convert people to buy wool who are already tuned into it and are what we call ‘considerers’,’’ Biggs says.
It all makes sense but still we end up back at the issue of price in a New Zealand context.
So growers will continue to do the best they can in the belief that things will improve eventually.
“This is a passion industry and you’ve got to love it and you’ve got to love your sheep, but I think people are being really tested at the moment. Really tested, especially if you’re at that retirement age,’’ says Yule. “Not everyone will throw the towel in. You can’t afford to. But it’s pretty tough at the moment. A lot of farmers live on very little and farming is a long haul. Your return on investment is very low. You’re doing well to make 4% on the value of your assets and that’s with a tailwind.’’
The most positive note struck in all this is coming from Woolworks’ Hales and Mazey. Part of their trip to North and South America was about sourcing equipment they believe can return a degree of manufacturing to the local sector, meaning people like Deane don’t have to buy back New Zealand yarn from overseas.
Then there’s the sustainability angle. At a cost of $12 million, WoolWorks has also fully electrified its Timaru site, which previously had its hot water and steam generated by coal.
“That’s the commitment we’ve made, not only to our business, but also the sector because we think it’s really important to give all New Zealand wool the opportunity to go through our scour and get into those value chains with a zero-carbon start to its life,’’ Mazey says.
“We’re very committed to making that work and building that demand for the farmers and, in time, building up that price.’’
Whether it is adding more value in the production chain here in New Zealand, or building higher demand from discerning, well-paying consumers overseas, it is clear that business as usual is not a viable path forward for our wool growers.