Last-standing producers of traditional style super-fine Merino wool are finding themselves in the box seat when it comes to choosing a buyer.
With a rapidly dwindling volume of the right stuff and increasing demand from luxury quarters, Italian mills are working hard to woo customers as they bid for security of supply.
On Thursday representatives from Loro Piana met with producers and their agents at Armidale – part of a tour that included Yass the next day and will conclude at Ararat, Victoria on Monday.
After five years of dismal prices, from 2011 to 2016, producers have only begun to receive just reward and for many the ability to produce the Italian style wool is no longer an option, as they steer down the path of SRS genetics and dual purpose ewes in order to find a fair return.
Super-fine wool grower, and buyer for Loro Piana, Paul Vallely, Crookwell, commiserated with producers over the reality facing mills that require an average 16 micron with 70-85mm staple length and a fibre curvature of greater than 70 degrees per millimetre.
“We realise that production of traditional wool comes with a financial penalty,” Mr Vallely said. “A lot of people are leaving the industry. Volumes are plummeting. This is the elephant in the room.”
In fact the numbers since 2013 until now are quite stark with the right style of wool production free-falling from more than 4000 tonnes to 1750t while wool with a bolder crimp and longer staple length has increased by 9500t as producers chase Chinese buyers who are interested in volume – for the moment.
It is no wonder producers are changing when the net profit of traditional wool equates to $4.14 dry sheep equivalent compared to $13.10 for non-traditional, bold crimp wool, $14.30 for 19-20 micron and $16.67 for dual purpose ewes that produce a prime lamb along with a fleece.
“Traditional style is going out the door but we aim to stop that,” Mr Vallely said.
Key to plugging the leak is to entice growers with handsome premiums. Already Loro Piana offers a 300c/kg bonus to their current spot price but their new contract, not yet sorted, is expected to be more tempting and is likely to include a floor.
However there is a critical catch – only non-mulsed wool will be accepted, no “Ifs” no “Butts”.
“We’re not here to argue whether it is right or wrong,” said one of the Italian representatives, who wished to stay anonymous as per corporate rules. “Our customers are demanding ethical treatment of sheep.”
While Chinese brokers right now purchase wool regardless of treatment another company representative said it could be dangerous to align with only one buyer and urged growers to adopt the Italian quality standards.
How did ethical customers know if an expensive suit contained mulesed wool? The answer was simple, if subjective: “trust the brand” said the Loro Piana representatives.
East Armidale producer David Waters, “Tarrangower” Hillgrove, has stuck with traditional production through the lean years because his family believes in their product. While they mules it is with pain relief, an accepted practice according to other Italian mills but not Loro Piana which markets “exceptional quality” to willing customers.
“We've been looking for a reason to go the next step,” he said. “But it depends on how much they want to pay. In saying that we are keen to pursue this opportunity.”
Dan and Sarah Calvert, “Kalgara” on the Gara River east of Armidale have successfully ceased mulesing for a decade and despite popular opinion say it is feasible and affordable.
They cull lambs with wrinkly breech and those that tend to scour.
“We find there is a genetic predisposition to fly strike,” said Sarah. “And mulesing won’t stop the problem completely. We’ve had sheep with fly strike on their shoulder and on their head.”
Arguments about greater loss due to dung stain when crutching as opposed to mulesing were disputed by the Calverts.
Meanwhile Loro Piana Australian representative Roland Gill told producers at Armidale that his company was looking for loyal suppliers willing to grow and learn as well as offer instructive feedback.
“It is less about the pay and more about who you wish to do business with,” he said. “We need to create a space where we can work together.”
On the company’s tour of New Zealand it came as a surprise that producers there wished to fix a rolling contract over a premium market price. But three years out was as far as Loro Piana was prepared to go, at this stage.
Peter McNeill, “Europambela” Walcha, told buyers that there was no way producers could deliver what they demanded in a bad year – like this one, in which he was bringing in 15t of feed a week to service his 17,000 ewes.
“Whether we can supply is in the lap of the dogs,” he said.
Mr Gill said any contract would be for wool that met the quality required and the company would not hold growers to volume.
“What we do ask is that producers have a commitment to improve. We are after progress not perfection,” he said.