Move to amalgamate wool auctions

The declining wool clip has fuelled debate regarding the amalgamation of Fremantle, Sydney and Melbourne wool auctions following Australia Wool Innovation’s (AWI) Wool Selling System Review (WSSR) which highlighted the need for urgent industry attention.

Last 2014/2015 season, 1,813,180 bales were sold through the Australian Wool Exchange. Of the bales sold, 946,010 were through the Melbourne auction house, 526,156 in Sydney and 341,014 in Fremantle.

Following the closure of Launceston and Newcastle wool auctions, Melbourne has attained 52pc of market share, Sydney 29pc and Fremantle 19pc.​

The move to rationalise the selling system infrastructure has been publicly supported by Wool Producers Australia, Victorian Farmers Federation, WA Farmers, TechWool Trading, Modiano Australia, Australian Merino Exports and United Wool Company.

Their submissions made to the review argued the infrastructure involved in the selling chain was geared for a much bigger clip and needed rationalising.

The national wool clip has contracted by 60-70per cent below the peak levels of the 1980s to an estimated 322 million kilograms greasy in 2015/16 season.

In WPA’s initial submission into the WSSR, president Richard Halliday said the three current selling centres may no longer be needed for the national flock which had dropped from 180million to about 70m.

“The demand for wool has obviously changed and a reduction to one lower cost regional centre could make sense as the current daily competition between eastern selling centres for price discovery could be considered to be counterproductive for growers,” Mr Halliday said.

WPA chief executive Jo Hall said the centralisation of the country’s auction houses should be investigated.

“There is potential interest in supporting the centralisation of Australia’s three auction houses if cost savings can be achieved and efficiencies realised,” Ms Hall said.

WA Farmers made the controversial submission in support of rationalising the selling centres due to Fremantle’s declining number of sale lots.

“… it makes practical sense to centralise and amalgamate the existing selling centres into sale by separation at one primary selling centre to be base in Melbourne, Victoria,” the submission stated.

Woolgrower Richard Bell, Paling Yards, Taralga, NSW, supported the centrialsation of the auction house in Melbourne. In his submission, Mr Bell said as an industry, growers needed to support moves to reduce costs.

“We have found that the decisions in the past have been made for us, instead of us as an industry making the hard decisions,” he said.

The Australian Farm Institute (AFI) conducted a study of the country’s auction arrangements in 2009 and found a shift from the three-centre model to one could save $5.2 million annually, or $32 million over 10 years. The panel believe the decline in production since the study meant savings would be much greater today.

While centralising to one centre could enhance competition, there had been criticism about the impact additional travel and brokerage costs would have on growers.

While acknowledging a shift in auction volumes from NSW to Victoria, the NSW Farmers Association said in their WSSR submission they were against the move because of competition between regional centres and “big traders could manipulate a market if there was only one centre”.

New England Wool’s submission to the WSSR revealed their concerns because centralising in Melbourne would remove NSW growers from the marketing process, however supported the centralisation of wool receival, dumping and shipping. ​

AWI will meet with woolgrowers in Sydney on 2 March to discuss the panel’s recommendations.