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An investment of $140,000 in a pilot wool clothing project has kick-started a unique selling opportunity for eight South Island sheep farmers.
The farmers, who committed an initial 2800kg of lamb and hogget wool to local Dunedin startup Agwool, have managed to elevate their returns to more than $40/kg for 31-32 micron wool. This compares to a current gross commodity price of around $5/kg for similar quality wool.
The fibre, scoured in Timaru, and processed into worsted yarn in Napier, is produced into high quality jerseys and other hardwearing gear in China. It is sold under the Agwool brand, the brainchild of former Tamahine Knitwear owner Ken Algie.
The strength of the model is that it is specifically designed to reduce intermediary costs and return the full margin to the farmer investors.
''It's a simple structure aimed at cutting out a lot of inherent industry costs related to procurement, marketing and the retail trade,'' Mr Algie said.
He said the original investment was truly a ''leap of faith'' by the original farmer group, who are also members of Agmatch, an online selling network of around 2500 farms and rural supply businesses.
That leap of faith extended to the use of crossbred wool for worsted yarn.
''Wool was supplied to very tight specifications and the original investors took on board the initial risk of scouring, testing and yarn production costs.''
The pilot also gave them an insight into the sales process.
''One of our guys has sold 70 jerseys already and he reckons he's only just getting into his stride,'' laughs Mr Algie, who acknowledges there have been challenges but ''we're all learning as we go''.
The venture has paid dividends. Mr Algie said the initial run of 1700 windproof jerseys has virtually sold out, even without any retail involvement.
Part of that is related to the price, which at $184 is around 60% of what the recommended price would be at shop level. This translates to a per bale price for crossbred wool of more than $7800, the majority of which is returned to the original farmer investors.
Agwool director and farmer Rick Cameron said the true differentiator is the direct involvement of the farmer directors.
''You should have seen the shearers and wool handlers smile with pride when we walked into the shed wearing these quality jerseys, made with the very wool that they had handled.''
Mr Cameron said the response has been overwhelmingly positive, from farmers and trade alike.
''It proves our product is sustainable and capable of scale, without government money or political involvement. It is about a whole new model to sell wool by re-training growers and regenerating the thought processes.''
Mr Algie said the success of this pilot project had encouraged Agwool to expand the product range into other lines, including socks, beanies and work shirts. The company is also evaluating insulation and carpet, for which it already had good initial inquiry.
He said the true value of the company was through its large network under the Agmatch platform, which has around 550 members who pay an annual fee of $500. Its e-commerce functionality allows farmer members to purchase a range of farm inputs, from professional services to fertiliser.
-By Brent Melville