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Thursday, 29 March 1984
Page: 846


Senator JESSOP(10.34) —The objective of the Wool Industry Amendment Bill 1984 is to provide the Australian Wool Corporation with further opportunities to raise money overseas. In his second reading speech, the Attorney-General (Senator Gareth Evans) summarised the Bill by saying:

. . . the amendments proposed in the Bill will allow for better management of woolgrower funds for market support operations and for wool research.

I hope that is right. I support what Senator Macklin said about the need for a summit meeting on the operation of the Wool Corporation and other matters related to it as soon as possible and as a matter of urgency. I have had a number of representations from the Australian Wool Processors Council with respect to this amendment. Several questions loom in its mind. For example, it asks: Why is the Australian Wool Corporation agreeing to what is an attempt to conceal correct prices? I have some notes which were provided by G. H. Michell and Sons (Australia) Pty Ltd whose head office is in South Australia. I seek leave to incorporate the information in Hansard.

Leave granted.

The document read as follows-

G. H. MICHELL & SONS (AUSTRALIA) PTY LIMITED

Wool Combers, Scourers, Carbonisers, Wool Buying Brokers

Telephone 258 4455 (11 lines) Telex AA 82203

Cables and Telegrams ''Michell Adelaide''

G.P.O. Box 1739, Adelaide South Australia 5001

Senator D. Jessop,

Parliament House,

Canberra, A.C.T. 2600.

Report on Pre-sale Dumping-Brisbane Sale 37-W/e 23rd March, 1984.

Prior to this sale a JWSO meeting was held with the main topic ''Market Reporting''. Apparently the brokers are still upset over last sale, when fleecewools in tripaks were quoted up to 2 per cent easier than similar wools in farm bales.

They insisted, with the backing of the AWC that in future the JWSO Market Report would be a blanket report, without any reference to tripaks. The buyers representative would not agree to this proposal and subsequently the JWSO Market Report from Brisbane will be from AWC/Brokers only.

Out of a total offering of 26,313 bales, 11,999 or 45 per cent were in tripak form! This total represented an increase of 14 per cent of wool offered in this form compared to the last Brisbane sale.

The overall selection was rather coarse with the bulk of fleecewools of good topmaking style, 22.5 to 24 micron with a fault content of 2-5 per cent. Skirtings mostly medium/heavy fault, 5-15 per cent, with a fair amount of colour , and carding types (locks, crts, lambs) suitable for carbonising.

The break-up of fleece/skirtings in tripaks of various brokers was:

Total in Broker

Total bales tripaks per cent Fleece Skirtings

First day- Dal-Winch 9,623 3,862 40 915 2,947 QWC 3,128 1,643 52 634 1,059 Grazcos 1,095 . . . . . . . .

Second day- Primac 5,461 2,194 40 441 1,753 Elders 7,006 4,300 62 2,143 2,157

In this sale, all brokers continued to have a greater percentage of skirtings in tripaks, while Elders increased their overall percentage to 62, including more fleecewools.

As in the last sale, the fleece portion in tripaks of Dal-Winch, QWC, and Primac was made up of inferior wools. Mostly tender, cotty or discoloured. However, in Elders catalogue the selection included more topmaking types.

The way in which the skirting section was formed, with 75 per cent in tripaks, makes a comparison of quotations between the two impossible.

Farm bale lots Tripak

Dal-Winch 78 381 QWC (Inter lots) 75 131 Primac 27 211 Elders 60 234

240 957

The market on the opening day was quoted generally unchanged for fleecewools, 2 per cent easier for heavy fault skirtings of broader quality, unchanged for carding descriptions.

Once again, with such a broad selection, together with the AWC dominating on these fleecewool types, it becomes difficult to compare prices. The AWC purchase of fleece was over 60 per cent.

Fleece Skirtings

AWC Buying-

Farm 3419 (61.2%) 12 (0.07%) Tripak 918 (60.1%) 118 (3.0%) Jumbos 340 (56. 8%) 10 (2.1%)

On the closing day, the AWC purchase of fleecewools was even higher at an overall 72.2 per cent.

Fleece Skirtings

AWC Buying-

Farm 3661 (72.1%) 51 7.6%) Tripak 2174 (81.0%) 120 (3.0%)

P & L made the few lots of 21.5 micron fleece 6 Australian cents cheaper in tripaks compared to farm lots on this day, but this would not be general.

People from the trade who operate on tripak fleecewools are all Continental firms such as P & L, Lemp, ADF.

All firms appear to have orders for tripak skirtings even Duncan purchased some in this sale, but these, of course, could be for an overseas order.

The Japanese section, with the exception of Nissho, who explained they had a Czech Indent order, all left the sale room when tripak fleece commenced to sell. Kreglinger also joined the protest. Textilimpex did not attend this sale.

The next Brisbane sale is scheduled for May 23/24th.

TABLE 1: RATIO OF FLEECE TO SKIRTINGS AT QWC-PSD BASIS

Skirtings

as % of Sale date

Fleece Skirtings total

October 3,700 4,300 54 November 2,754 5,929 68 December 1,759 4,905 74

Total Dec.

Quarter 8,213 14,134 63

BASED ON NORMAL SALES IN BRISBANE

18,437 3,910 17.4

Sale date

Fleece Skirting %

February 24 2,249 6,782 1 75 March

Note (1) Skirting in tripacks slightly superior


Senator JESSOP —On 1 December 1983 I asked the Minister for Resources and Energy (Senator Walsh), who represents the Minister for Primary Industry (Mr Kerin) in this place, several questions about the pre-sale dumping of wool at the Queensland Wool Centre. I was less than satisfied with some aspects of the response, but as I believed there were only six months remaining of the 12 month trials, I decided to wait for the results of the commercial evaluation. I hoped that the study being undertaken by the Australian Wool Corporation would prove whether the continuation of the Queensland Wool Centre trial was warranted on commercial grounds. I have now changed my position as a result of a report in last Friday's Australian Financial Review which indicated that more information will be sought in relation to pre-sale dumping and that sales will be supported through the floor price for a further 12 month period. The Minister's replied to my question as to whether the Government should intervene should wool brokers proceed with the installation of further pre-sale dumping, as follows:

The Corporation has indicated it will not continue a reserve price support indefinitely for pre-sale dumped wool unless the system proves its commercial viability and potential net benefit to the wool industry.

The Australian Financial Review article reported that the Chairman of the Australian Wool Corporation, Mr David Asimus, had said that: 'it would be very reasonable to extend the support for another 12 months as the market must get above the floor price level'. What is so surprising is that at the last meeting with the brokers, the Australian Wool Processors Council was told that pre-sale dumping at the Queensland Wool Centre was an outstanding success and had fulfilled all the objectives set. Only two months later the Australian Wool Corporation has seen fit to continue to propose the operation through the floor price. Not since 1980 has the Australian Wool Corporation conducted a detailed comparative study of the more restricted attempt at pre-sale dumping, known as the jumbo bale exercise. One would have thought that in matters of this nature continuous monitoring would have to be undertaken in order to assess the acceptance level under varying demand conditions. There must be some correlation between the two forms of pre-sale dumping, for the Corporation has indicated that the difference in the jumbo price and farm bales would be greater than that anticipated from tripacks.

If the Australian Wool Corporation can forecast this with such preciseness I for one cannot see why it cannot evalute the acceptance level of tri-packs by the lack of response they have received from China and Russia. Together the Japanese mills and the Australian industry purchase about two thirds of our clip . Certainly, during February when wool prices rose above the floor level it was reported that tri-packs were quoted 2 per cent lower than farm bales.

It has been stated that tri-packs would be considerably cheaper at the Queensland Wool Centre if the normal proportion of skirtings had been offered. If the Wool Corporation has extended the trial period to assess the influence of tri-packs on the selling price, I suggest that skirting should represent only 17 per cent of the total sold in tri-packs, not 80 per cent as was offered during the most recent sale. This is certainly not representative of the final proportions and must distort any investigation into demand and price.

I indicate that this is not an isolated instance of a distorted clip representation. Skirting represented about 75 per cent in the previous offering. At the beginning I explained that I was less than satisfied with the replies received through the Department of Primary Industry from the Australian Wool Corporation. The first two replies were evasive, although it was indicated that detailed comparisons were currently being undertaken. I ask now why these comparisons, as well as the assessments made in the desk studies by the investors in the Queensland Wool Centre, cannot be made available to all parties concerned for the purpose of appraisal and comment. I asked the Minister in my question--


Senator Walsh —What question was this?


Senator JESSOP —I referred earlier, before the Minister for Resources and Energy came into the chamber, to a series of questions I put on notice on 1 December 1983. I am referring now to the answers and demonstrating some of the doubts I have about them. In a question directed to the Minister for Resources and Energy representing the Minister for Primary Industry I asked that an international authority on commodity handling undertake the comparisons and commercial appraisal. I requested that this approach be considered not because I did not believe that the Australian Wool Corporation was competent, but because I felt that impartiality must be achieved and demonstrated. Certainly bias was demonstrated in the reply from the Minister, which stated:

. . . a study into the comparative effects of pre-sale dumping on the wool industry is being undertaken by the Australian Wool Corporation on behalf of woolgrowers.

He did not say this was on behalf of the buyer and users; he stated specifically that it was on behalf of the woolgrowers. How can the evaluation of the net benefits to the wool industry be unbiased when the buyers and users have been excluded from studies and earlier assessments?

The Australian Wool Processors Council has indicated to me that it is appreciative of the understanding displayed by the Minister for Primary Industry . In fact it undertook to support sales at the Queensland Wool Centre as a result of this understanding, even though overseas buyers walked out of the sales to demonstrate their opposition. I understand that the Australian Wool Processors Council, whose members process more than 20 per cent of the Australian clip, are giving serious consideration to boycotting the Queensland Wool Centre as a result of what they consider to be a breach of an understanding . The competitive position of the local industry is aggravated, as it cannot take advantage of the lower freight rates for superdensity dumped wools. This does reduce their competitiveness on overseas markets. While they see this as a commercial hazard, they are seriously disadvantaged by the charges made for a pack which they do not want and which adds a considerable amount to their costs, as these bales must then be de-dumped. In fact it doubles the original dumping charge, so they are paying twice for something they do not want. So far, discussions with brokers have yielded nothing and have been described to me as circular negotiations, getting nowhere.

I put it to the Minister representing the Minister for Primary Industry that this matter can hardly be considered purely a commercial one, for discussions among the parties concerned are really yielding nothing. The extension of the trial period could quite easily develop into a situation where attendance at the Queensland Wool Centre will be limited to the European buyers who accept the bales because of freight savings. What I also find surprising is that within the last week the brokers involved in the Queensland Wool Centre have invited wool buyers to join with them to determine the features that need to be exercised to evaluate properly pre-sale dumping trials. Surely after the original investigation and six months of trial it is a somewhat belated attempt by the brokers to see what features need to be exercised.

It seems to me that this latest nonsense will result in another circular discussion designed as an iron lung to extend the life of the faltering trial into pre-sale dumping, something that has been mishandled from the time it was forced on to the industry. I am not saying that there are not advantages in pre- sale dumping. What I am saying is that when a form of packaging that is not wanted is introduced without consultation, and additional charges are made for this unwanted package as well as placing additional burdens on sectors of the industry, the exercise will need propping up. That is what is happening, as is evidenced by the Australian Wool Corporation having to buy up to 90 per cent of the fleece wools offered in tri-packs.

I suggest that this matter has become critical and that this Government should not stand aside from an issue that could seriously jeopardise the sales of Queensland wool and the operations of the Australian processors as well as redirect our major customers to purchase from South America, South Africa, New Zealand and their own domestic wools. I say that in the spirit of constructive comment. As I said at the outset, it is important that top level discussions be carried out, including wool processors, because I believe it is of critical importance to the industry that we sustain the valuable help that has been provided by the wool processors of Australia.

I have two or three attachments. I will exclude the Press cutting. I have already included the comments of Michells on this subject. I have another comment from the Australian Wool Processors Council, expressing its concern. I seek leave to have that incorporated in Hansard.

Leave granted.

The document read as follows-

AUSTRALIAN WOOL PROCESSORS COUNCIL

Representing Members of:Wool Textile Manufacturers of AustraliaWool Scourers & Carbonisers Association of Australia

Industry House, 370 St. Kilda Road, Melbourne 3004

Telephone: 698 4322

690 6870

Telex: 32596

Communique:

AUSTRALIAN WOOL PROCESSORS COUNCILS' POSITION SUBSEQUENT TO DISCUSSION WITH THE NATIONAL COUNCIL OF WOOL SELLING BROKERS OF AUSTRALIA-2ND FEBRUARY, 1984

1. This council is not convinced that sufficient thought has been given to improving the handling and movement of farm bales, prior to sale to warrant the installation of a system only capable of reaching maximum efficiency under total presale dumping conditions.

2. There seems to be a tendancy on the part of the brokers to describe presale dumping as ''progress'' before the benefits are known.

3. Until an evaluation of both presale and postsale dumping can be objectively approached with due regard to all aspects of distribution and use, further dislocation of sections of the wool industry including labour and management should be avoided.

4. As commercial acceptance should eventually depend on the net cost or worth to each party, the conflict cannot be overcome at this point by compensatory means.

5. The AWPC recognise that sales in Brisbane did present unique problems and that improvements were overdue. It also acknowledges that its members do not generally bid as widely or purchase at the same level in Queensland, as in other States.

Local processors are, however, concerned that presale dumping could flow onto other centres without due regard to alternative methods or indeed consideration to important issues and the disruptive influence this will have on trading.

6. Should assessments of technical and commercial acceptance, as well as viability of presale packaging include the first three sales at the Queensland Wool Centre i.e. quarter ending December '83, significant adjustments will need to be made to compensate for the unrepresentative nature of the wool offered.

Over the past few years skirtings have represented about 17 per cent or 18 per cent of the total sales in Brisbane. The average level of skirtings sold in tripacks at the Q.W.C. during the first 3 sales represented 63 per cent of the total. This is 3.6 times greater than normal.

The acceptance of skirtings sold in tripacks was significantly higher than fleece wools, but still below the level of acceptance in farm bales. The trade demonstrated that presale dumping was unacceptable as it bought less than 15 per cent of fleece wool offered, while it purchased larger quantities of skirtings in farm bales than in 3BUs and 2BUs.

7. There have been several forecasts produced suggesting a significant increase in the level of activity in the scouring and topmaking in Australia during the ' 80s and '90s. While Australia's lack of positive export incentives has retarded growth, extensions to presale dumping would result in reductions rather than increases in activity.

8. This council repeats its opposition to presale dumping on four grounds.

The imposition of total presale dumping in any one area denies the buyer's freedom of choice.

Significant charges are made without any benefits to buyer/user.

Capital expenditure will be incurred.

Dedumping and disruption to work flows will result in substantial increases in operating costs.

9. The ability of the Australian wool processing industry to compete on International markets will be impaired as freight advantages will operate in favour of superdensity dumped bales of greasy wool.

10. While the local processors are concerned about their own position, they recognise that the majority of Japanese buyers, the USSR and the Peoples Republic of China oppose presale dumping at the Queensland Wool Centre and as a concept.

Should the reduction in costs achieved by brokers be less than the costs incurred by prospective buyers, the adoption of presale, dumping will be counter productive for total industry. Commercial judgement that will be exercised by disadvantaged buyers will dictate that the discounts must be greater than costs. The resultant price depression will be supported by those not disadvantaged.

The Australian Wool Processors Council proposes that serious consideration be given to the withdrawal of the support price for presale dumped wool. It should be obligatory upon any enterprise engaged in presale dumping to underwrite price assurances equal to the current prices for farm bales. Unless offsets greater than the costs incurred by the buyer of presale dumped wool can be achieved, then presale dumping must be regarded as futile.


Senator JESSOP —I also have a summary from 'Wool Market News'. I suggest it would be helpful to have that also incorporated in Hansard and I seek leave to do so.

Leave granted.

The document read as follows-

FEATURES

The tone at Australian wool auctions in Brisbane and Adelaide this week was distinctly weaker. The market indicator eased a further 3 cents to 487 cents/kg clean and the AWC purchase rate reached 32.2, its highest level since the beginning of December. The strength of the Australian dollar and the increased volatility of exchange rate fluctuations this week were significant factors in the market.

Prices for practically all descriptions were affected by the quiet trading conditions. Representative quotes are only available for wool in the narrow range 21-24 microns and these were between 2 and 5 cents lower than last week. Prices for most types in the 23-24 micron categories and 30 micron and coarser categories are at AWC floor levels. Nominal quotes for the restricted supplies of 19 and 20 micron wool closed 3 cents lower than last week, while the 25 and 26 micron indicators were nominally 4 and 2 cents lower, respectively. Broader categories were largely unchanged. Merino skirtings and carding descriptions were notably cheaper this week as reflected in the Merino carding indicator which fell 5 cents.

Price declines were greater for average style wool carrying medium to heavy vegetable fault while values for good style fleece containing light VM fault were less affected. The fact that the selections at both centres contained varying degrees of vegetable fault may have contributed to the high AWC purchase rate overall, although the large proportion of wool offered in tri-packed form clearly contributed to the high AWC purchase rate in Brisbane. The offering of 59,856 bales was one of the smallest for the season to date and only 64% was cleared to the trade.

The downtrend in the South African wool market was reversed this week; trading was very active and the new market indicator rose 4 cents to 571 cents/kg clean. Prices for 20 micron wool rose by 2.5%, 21 micron wool was unchanged and 22-25 micron wool was up to 1% dearer. The total offering comprised 25,609 bales of which 92% was cleared to the trade.

Approximately 28,000 bales are rostered for sale at Invercargill, N.Z. today.

Sales next week (approximately): Newcastle 20,500, Portland 22,800 bales.

Date

Offered

Sold

Passed

National Council of Wool Selling Brokers of Australia

This Centre

March Bales Trade AWC Per cent Provisional figures for:

This week season

Per cent Per cent Total 20-22 59,856 64.0 32.2 3.8 Average price (c/kg gsy) 267.93 302.09 Brisbane 21,22 26,537 56.8 41.2 2.0 Average price per bale ($) 462.66 505.04 Adelaide 20,21 31,854 69.3 25.2 5.5 Provisional proceeds ($M) 25 .30 1,326.88 Other 20,22 1,465 76.6 22.1 1.3 Average bale weight (kg) 172.68 167.32


Senator JESSOP —That is all I want to say on the subject. I know that the Minister for Primary Industry is a sympathetic person and I believe that, as demonstrated by the Wool Processors Council, he has a knowledge of their concern . I know that the Minister at the table, Senator Walsh, will take note of what I have said on his behalf. I hope some action will be forthcoming in the near future.