No piggy-back ride into US for Wool Partners

Stuart Chapman ... doesn't want distractions.

09-02-2009 | Alan Emerson

The news that Elders Primary Wool had completed a partnership deal with the American carpet giant and world's largest carpet retailer CCA Global partners (CCA) is all good for sheep farmers.

Elders Primary Wool is half owned by Elders and half by Primary Wool Co-operative, a co-operative formed in 2003 by a merger of two farmer-owned co-operatives, Dannevirke based East Coast Wool and the wool division of Christchurch based Combined Rural Traders (CRT). Between them they have around 9000 farmer shareholders, with both operating for 50 years or so. Elders Primary Wool was formed in 2005.

Predictably Elders managing director, Stuart Chapman is bullish about the deal.

"What this means is that we can get strong wool to the biggest carpet retailer in the world," Chapman said. "We'll be focussing on delivering benefits to our clients ASAP.

"We have a very strong co-operative and strong partner who's done a lot of research in the United States. We're very confident of success.

"We've done a lot of work over many, many months both here and in the US. It's been a huge investment by Elders.

"We've been driven by the principle that to change wool's fortunes you have to be market driven, not pushed. This is a market driven initiative.

"Our aim is to get better value for strong wool that is long term, profitable and sustainable," Chapman said.

To be a shareholder of Primary Wool Co-operative you simply have to purchase a minimum of 500 shares at one dollar a share and if you sell your wool through Elders Primary Wool you get a 3c a kilogram rebate.

The CCA website is impressive and worth a look. They are huge and have a stratified product and marketing structure which will be good for wool. The deal is great for farmers, it cost us nothing and the outlook for wool has changed from abysmal to positive.

Surprisingly, subsequent to the Elders announcement I received a fatuous media release from Meat and Wool NZ "welcoming" the initiative.

"Importantly Elders have embraced the concept discussed in the Wool Industry Network (WIN) strategy" I read. It got worse. "WIN has certainly been the catalyst for change we were hoping for when we agreed to fund the initiative three years ago."

Then came the king hit. "However we now have the situation where Elders and Wool Partners International are pursuing the same strategic principles. It would be more desirable for both of these companies to come together and jointly innovate to improve the returns for the entire wool industry."

I asked Stuart Chapman about the WIN and WPI strategies.

"I'm not aware of their strategies," was the reply.

So what we have is a farmer owned co-operative in partnership with a billion dollar company, pursuing an initiative with the world's largest carpet retailer with the aim of increasing returns for its farmers. They did that on their own over a long period of time with no industry good funding, direction or advice, contrary to the claims of MWNZ.

In parallel we had our levy funds spent on the Wool Industry Network to do a report which I've described previously as average. Then with absolutely no farmer consultation the son of WIN, Wool Partners International, purchased PGG Wrightson's wool division for $46 million which is a contingent liability to farmers. I find that arrogant and absurd as farmers could join an established and successful co-operative for $500.

Then beyond belief, MWNZ suggests the successful co-operative that has achieved a stunning market initiative join forces with a lame duck outfit with no runs on the board in the form of WPI.

My simple question is: Why spend $47 million buying a company in direct opposition to the 9500 farmers and levy paying owners of Elders Primary Wool? Then why would you then go back to those farmers and suggest they dilute the benefits of their co-operative venture by joining forces with an outfit set up in opposition to them?

I understand Elders were as surprised as I was to read the release.

Asking Elders what they thought of a joint venture with WPI their answer was: "We're making good progress in the US, we're concentrating on increasing the price of wool and we don't want to be distracted."

I sincerely hope they're not distracted as a deal like that in the lucrative US carpet market is great for local strong wool growers.

  Printable View