Wool Production in New Zealand Merino

New Zealand is the world's largest producer and exporter of crossbred wool, and is second only to Australia in the export of all wool. There are over 220 companies registered as exporters of wool although fewer than half that number are actively engaged in wool exporting. In 2002-2003 the top 20 exporters accounted for about 75 percent of all wool exported. In that year total wool sales in New Zealand amounted to 172 680 tonnes (clean), of which 79 percent by volume was exported. Seventy two percent of total exports was as scoured wool and the remainder was as greasy and slipe wool. Fine wool (<24.5 microns) made up 5 percent of export volume, 15 percent was medium (24.5-31.4 microns), 30 percent was fine crossbred (31.4-35.4 microns) and 50 percent was strong crossbred (>35.4 microns).

Traditionally wool was sold by auction, but there has been a steady decline in the proportion of wool sold this way. Many farmers now choose to sell wool directly to private buyers and end-users. Farmers are keen to develop relationships with processors so they can receive information from end-users and adjust their wool specifications to market requirements.

Wool export volumes and average prices for main markets (in descending order of value, left to right)
Year ended June 2003

exports

Less than half of New Zealand's shorn wool is now sold at auction. All this wool is tested prior to sale at an accredited testing facility, which provides objective measurements of commercially important characteristics. This gives New Zealand wool exporters a key competitive advantage, as they can supply wool that meets buyers' specifications. The characteristics tested include yield, condition (moisture content), fibre diameter, colour, length, strength, and bulk.

There are now nine wool scouring plants in New Zealand following further rationalisation of the industry in recent years. These plants have invested in new, locally developed technology, creating one of the most cost-effective scouring industries in the world. New Zealand exports that technology to other wool-producing and processing countries.

Industry Structure

There are several organisations that make a significant contribution to the sheep and cattle industry. These include:

The New Zealand Meat Board (Meat New Zealand) is a statutory body responsible for administering New Zealand's access to tariff quota markets: sheepmeat to Europe, beef and veal exports to Europe and the United States, and lamb to the United States. It also contributes to trade policy and market access issues. Meat New Zealand funds generic promotion of red meat, and research and development in the meat industry. In addition, it provides producers, processors and exporters with information on new technology, and market and product information. The board of management is made up of seven producer-elected directors, four directors elected by meat processors and exporters, and two directors appointed by the Minister of Agriculture on the Board's recommendation. It is a statutory producer board funded by producer levies on stock slaughtered.

The New Zealand Meat Board has recently proposed that the Meat Board Act 1997 be amended so that the Board's industry-good functions can be brought under the Commodity Levies Act 1990.

A Meat Board Restructuring Bill is planned for introduction into Parliament in 2003 with the intention that it be passed by the middle of 2004.

On completion of these legislative changes, the New Zealand Meat Board would have the responsibility for managing the access to meat export quota markets, and a new industry-good body, initially named Single Organisation Limited, would manage all the industry-good functions, such as funding of research and development for both the meat and wool industries.

Wool Board Disestablishment Company Ltd is a grower-owned company. It has statutory responsibility for winding up the affairs of the former statutory New Zealand Wool Board, distributing the former Board's assets to growers, and collecting and administering a levy on wool (until 30 June 2004) for industry-good purposes (research and development, technology transfer, education, training, etc).

Wool Production by Type

Production by type

Source: Meat NZ

The New Zealand Merino Company Ltd is a joint venture wool services company between New Zealand Merino woolgrowers (through the holding company Merino Grower Investments Ltd) and Wrightson Ltd. The company handles the majority of New Zealand's merino wool clip and it has developed a number of direct supply linkages where growers are contracted to supply agreed amounts of fibre meeting agreed specifications for particular manufacturers.

Wool Equities Ltd is a grower-owned investment company specialising in the wool, sheep and primary industry sectors and in wool research and development. Its initial shareholders are non-merino woolgrowers. It has a number of subsidiary and associate companies:

  • Ovita Ltd is a sheep genetic research company focused on the development and commercialisation of products, services and intellectual property derived from knowledge of the sheep genome and sheep genetics. Wool Equities Ltd has a one-third shareholding in Ovita, the other shareholders being the New Zealand Meat Board and AgResearch.
  • Covita Ltd is a wholly owned subsidiary of Ovita whose role is to commercialise Ovita's research where it is applicable to off-farm markets.
  • Keratec Ltd is a technology company creating new materials from natural sources using technologies that dissolve then isolate fractions of keratin proteins and lipids from wool. The company is developing and investigating commercial opportunities in the product areas of cosmetics, medical materials, fine fibres for high value textiles, and adhesives and resins.
  • Canesis Network Ltd is a new science and technology company formed out of the previous operations, intellectual property, equipment and resources of the Wool Research Organisation of New Zealand (WRONZ). Canesis has two shareholders - WRONZ with 66.5 percent and Wool Equities with 33.5 percent. Canesis provides research, technology and development services to the WRONZ membership (over 100 companies worldwide) and it undertakes contract research for the New Zealand Government, the international textile processing industry, woolgrowers and related organisations.
  • Wool Interiors Ltd is a wholly owned subsidiary of Canesis whose role is to advance the performance, appeal and market profile of wool floor coverings throughout the world. Wool Interiors manages the Fernmark brand.
  • Tectra Ltd is a wholly owned subsidiary of Wool Equities Ltd, established in July 2003 from the assets formerly used by "WoolPro" (Wool Production Technology Ltd). The company specialises in technology transfer to farmers, the provision of shearer and woolhandling courses, independent wool appraisal, pricing, reporting, quality management and risk assessment services.
  • Meat Industry Association of New Zealand (Inc.) is the trade association that represents meat processing and exporting companies. The Association provides a forum for formulating collective views on issues of industry-wide interest.
  • MIRINZ Food Technology and Research Ltd is owned by AgResearch to carry out research into meat, meat products and processing, food systems, science, technology and safety.
  • With the exception of the New Zealand Meat Board and the Wool Board Disestablishment Company Ltd, all the above entities operate under generic legislation.

Markets

Access to world markets for meat and fibre is vital for New Zealand farmers, as the domestic market is too small to absorb the volume of production.

Current Trends and Future Outlook

Since 1984 farmers have had to adjust to the removal of subsidies and the deregulation of the economy. Sheep and cattle numbers have fallen by 25 percent from the peak in the early 1980s and farmers have diversified, especially into dairying and deer farming.

Recent productivity and efficiency gains in agriculture have surpassed other sectors of the economy; for instance, the quantity of lamb exported has not dropped despite the 25 percent drop in sheep numbers.

Beef exports have increased and, most dramatically of all, total export returns from dairying now exceed meat and wool combined.
Farmers have responded to new market opportunities, adopted new technology, improved livestock genetics, and increased the scale of their farming businesses. They have responded to market signals by adapting their land use to suit the relative profitabilities of different products - lamb, beef, wool, venison and velvet - and where land is suitable, arable and horticulture crops.
Productivity will continue to increase on the farm while producers and processors keep responding to increasing consumer demand for improved product quality.

sheep

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