Farmers Not Exposed To Export Risks

FARMERS NOT EXPOSED TO EXPORT RISKS OR CONTRACT ISSUES

Meat & Wool NZ chairman Mike Petersen is on the wrong track in suggesting farmers were out of pocket, because a few wool export contracts have been renegotiated.

Growers who supplied the wool would not pay a cent for any losses from renegotiated contracts, the president of the NZ Council of Wool Exporters, Mr John Henderson said.

Mr Petersen’s claim that wool exporters had renegotiated contracts to the detriment of the wool industry was factually incorrect and this indicated a serious lack of knowledge on how the industry works.

“When he urged farmers to question any future relationship they might have with exporters who might have been involved, it was a mischievous attempt to gain farmer support for the new company Meat & Wool NZ is promoting as Wool Partners International.

“The global recession is all about a slow down in consumers buying manufactured items. It’s much bigger than just a wool problem and it is completely unrealistic to think that wool prices we got last year can be replicated in this environment, even given the exchange rate.

“The New Zealand exchange rate might have dropped 30 percent, but demand for manufactured products has dropped a lot more.

“People are not spending money, new housing in the US and elsewhere in the world has dried up. The result is a much lower demand for carpets or curtains. This translates to a lack of demand for wool and in turn affects prices.

“Wool exporters’ margins are based on price and our businesses rely on a viable sheep industry, so there is every incentive for us to maximise returns for growers.

“In many cases the wool where contract issues existed was bought and paid for up to six months ago,” Mr Henderson said. “It is ridiculous to suggest farmers would be affected. It is the individual exporter who will absorb any losses, if they occur.

“In many cases the renegotiations related to delivery delays, rather than talking the price down,” Mr Henderson said. “If we don’t get paid when we expect to, it creates cash-flow problems and this stretches our bank facilities.

“The delivery delays make it harder to buy more wool for the next round of contracts. The situation is completely divorced from farmer payments, which are made 11 days after the sale and have never been defaulted in the history of the wool industry.

“It is the individual exporters’ choice on how they deal with contract issues. They could face a total contract renege, or try and salvage something from a deal that was originally made in good faith and based on long-established business principles with traditional wool-using clients.

“The situation is a reflection of the enormous stress facing global carpet and textile manufacturers who are desperate to stay in business.”

He said in most cases, exporters have held the line – but often at a cost with the loss of not only existing contracts, but also the loss of a customer and future business.

Mr Henderson said wool exporters are continuing to maintain the New Zealand position in a world market that becomes more difficult each day.

“At the moment Mr Petersen’s protégé company is immune from these problems, because it hasn’t even started operating yet. Does he really think it will operate under a different set of international rules?”

A claim that growers were barely covering the cost of shearing was another issue Mr Henderson picked up on.

“It costs $3 to shear a sheep and on current prices farmers were making a net gain of $10 to $12 over and above these costs. For some with 1000 sheep they’re getting a wool cheque for $10,000 to $12,000.

“This is a really lousy price, especially when it’s compared to meat. Lambs are fetching up to $100 each; it was natural to focus on meat breeds and swing away from quality crossbred wool producing sheep,” he said.

Mr Henderson said the “go it alone” plans by Wool Partners International were flawed and farmers should be wary of another Wool Board-style cash-consuming cow.

ENDS

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