Addressing challenges in the wool industry needs to start at the farm gate.
That is the message from ANZ economists in a report on the wool industry and its ''battle for survival''.
The sector had been declining for decades. The industry model was decentralised, with up to 35 exporters and characterised by low profitability, wild swings in commodity prices and prospects linked to Asia, in tandem with the wider meat industry agenda, the report said.
While there had been been various ownership changes and branding initiatives, in general, farmers continued to show disunity and a lack of collective enthusiasm to invest in one particular proposal.
Elements critical to changing farmers from being price takers to price makers included more investment, consolidation of the clip through fewer channels, closer partnering with retailers, clearer benchmarks, better information flow and price signals, and the repositioning of strong wool and its associated end products as fashion items.
One simple mechanism to help increase the information feedback loop and price signal from consumers/retailers to farmers on value differences would be a ''national wool schedule'' which clearly identified the various values for different categories of wool, according to buyers' preferences.
Farmers could support change in the way they committed their wool for sale, or invest capital, the report said.
While there had been some consolidation in the supply chain, ''more would not go amiss''. The report questioned whether having four main wool sales channels and 35 ''competing'' exporters across a $771 million export base was effective.
To date, no one proposal had yet reached critical mass, but the amalgamation efforts of Wools of New Zealand and Elders Primary Wool could be the start of ''something larger, further down the track''.
Synthetic fibres represented the greatest competition in the carpet and rug industry, accounting for about 98% of consumption.
Wool prices had improved slightly in recent months. They seemed to have benefitted from better demand from China and India and a 17% increase in cotton prices since November.
Year-to-date wool exports were up nearly 16% on the same period last year. Good auction clearance rates, around the 90% mark, suggested farmers had not been willing to hold wool back, despite prices being 22% below last year, the report said.
