China’s most powerful wool companies are starting a trial to buy wool directly from some of Victoria’s biggest woolgrowers under long-term fixed-price contracts.
The scheme, which will circumvent the traditional wool auction system, will see more than 1000 bales of wool supplied from about 10 farmers every year for the next five years, at prices averaging $18-$22 a kilogram for fine merino wool.
The experiment was revealed yesterday at the first meeting of the influential China Wool Industrial Association held outside China at the elegant Lal Lal Estate sheep station near Ballarat, now owned by the world’s biggest wool top-maker, Tianyu Wool and its owner-president, Quignan Wen.
He told more than 130 delegates from China’s 80 major wool processors, spinners and wool textile manufacturers that they must help boost and revitalise the Australian wool industry by paying prices fair to both local woolgrowers and their own businesses. China buys 80 per cent of Australia’s $3.3 billion wool clip every year, a relationship that dominates the world’s wool trade.
Many of China’s wool carding, combing and spinning mills are not running to capacity because the Australian wool industry has shrunk to just one-third of its size 30 years ago, with just 330 million kilograms of wool now produced annually from 75 million sheep.
But Mr Wen is confident the future can be much brighter, provided Australian woolgrowers start expanding their flocks, Chinese importers stop buying and withholding wool bales from the industry and speculating on price, and the wool price rollercoaster that is so detrimental to both sides of the industry ends.
Geoff Fisken, former Wool Producers Australia president and the fifth-generation farmer who sold Lal Lal Estate to Tianyu Wool three years ago for $20 million, said the 10 Victorian farmers who had agreed to be part of the trial to directly sell wool to Chinese processors liked the certainty of receiving about $20 a kilogram for their fine micron wool for at least the next five years.
“The feeling from this significant group of farmers — they all have more than 4000 sheep and one has more than 30,000 — was that a price of $18-$22 a kilogram depending on micron (wool fineness) provided a pretty good margin to consider,” Mr Fisken said.
Qianlong Ji, CWIA chairman and president of the Zhangjiagang Yangtse Wool Combing company, said a closer, more direct relationship between some of Australia’s biggest merino sheep farmers selling more than 100 bales each every year directly to top makers such as Tianyu Wool would secure wool supply for the industry and provide stability and fair prices for growers.
“Ten years ago it would have been impossible to imagine a Chinese wool processor like Mr Wen coming to Australia and buying such a large beautiful farm (as the Lal Lal estate),” Dr Ji said. “But the links between China and Australia are getting so much closer; in the wool industry we couldn’t do without each other so now we must help each other to grow more wool.”
By SUE NEALES