THE wool industry’s head honcho Stuart McCullough believes the newly announced development of the $3.6 million Wool Exchange Portal will be transformative to the industry.
The chief executive of Australian Wool Innovation believes the public reporting of industry service and broker fees are set to trigger $38M across 15 years in industry benefits.
But what exactly is a WEP and how will it work? Mr McCullough answered ten questions on what to expect from a new digital wool trading platform.
How will the Wool Exchange Portal operate?
A new name for the portal is one of the issues we are addressing but essentially it will be a central digital location for those looking to either sell or buy wool. It will clearly outline the various costs associated with selling by various means. It will not only increase the transparency around the costs of selling wool but also streamline the transaction and allow benefits such as the aggregation of wools according to any parameter and increase competitive tension for sellers given the digital nature of the trading.
How much will be invested in developing the WEP?
Given the details of the build are unsure at this stage, an accurate estimate cannot be made but it will cost $3 million minimum. Given it currently cost over $300 million annually to sell the national clip, I think this is good value.
Will this be exclusively financed by AWI?
The build phase will be financed by AWI. It’s expected that in the initial operations of the “New Company” it will need to be supported somewhat. Ultimately this new company will need to “wash its face” and AWI and let the commerciality of the portal be tested.
How is it estimated to deliver $38 million in benefits to the industry?
The calculations have been formulated by an economist in collaboration with the WEP - Working Group. The assumptions were agreed to by the Working Group.
Why is this the right time to introduce a digital platform?
Because we are well into the digital age and wool is one of very few commodities globally that does not have a digital trading platform. The extensive consultation with all points of industry over the past three years has shown the Australian wool industry is ready for this change and ready to explore the benefits it offers. The open cry auction system and sample boxes will still be available but we must fully utilise digital technology when it offers so many global opportunities.
Will AWI be sole owners of the Wool Exchange Portal?
The share structure of the new company is yet to be determined however woolgrowers we imagine would have the greatest shareholding, representation and influence.
What influence do you see the WEP having on the trading of wool?
Making it much easier to purchase wool, making it much more transparent for growers to know the full cost of selling wool through various channels.
Who will build the platform and how will it be managed?
Unknown as yet but more than 10 potential vendors of digital exchanges have submitted options.
When do you expect the WEP to be operational?
Mid to late 2018 is the build estimate at the moment. Operational preparations will run in parallel.
Do you expect any industry resistance to this digital disruption?
Change often brings resistance however the extensive consultation, discussion and input from all aspects of the industry over the past three years has given people and organisations ample opportunity to be involved. It has been pleasing to see the unanimous support the Working Group has been able to achieve through its work. It is a very diverse group and credit to the WEP-WG for the progress it has achieved.