Wool Transparency Trends

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Wool transparency trends

National Wool Declaration rates close to 70%; Australian wool exporters make industry’s first cross-border blockchain transaction

Reflecting the importance of transparency in global supply chains, figures released 20 May by the Australian Wool Exchange (AWEX) show that almost 70% of the Australian wool clip is declared.    

First launched in 2008 by AWEX, interest in Australia's National Wool Declaration (NWD) is increasing every season, said Mark Grave, AWEX CEO. In Tasmania and Victoria, the declaration rate is over 80% and increasing.

Grower engagement has been key to lifting the adoption rate of the programme. "The tipping point has been passed and the 'Not Declared' (ND) status is now the minority," Mr Grave said.

Market signals for Non-Mulesed declared wool

The market has been showing consistent and increasing market signals particularly for Non-Mulesed (NM) declared wool. 

About 13% of the declared wool comes from non-mulesed flocks.

The NWD is a voluntary declaration made by wool growers and is shown, in Australia, on IWTO test certificates issued by Australian Wool Testing Authority (AWTA). Approximately 80% of the fine Merino wool used for apparel is sourced from Australia and sold through AWEX. Every bale sold on auction is tested by AWTA, with nearly 100% of wool sold with an IWTO Test Certificate.

Traceability in action along with wool supply chain

Top makers buy wool on the basis of the test certificates, which includes the mulesing status of each lot of wool.

When a spinner or other later-stage processor requests the mulesing status information, the AWTA certificate or a summarised Mulesing Status Report is passed along the supply chain.

Because of the way wool is blended in the spinning process in order to meet the requirements for each order of yarn, it is likely that wool from different farms will be brought together to produce the order's specifications.

If a client wishes to stipulate the origins of the wool, this is confirmed with the spinner in advance, in order to track the different batches of wool.

All major wool-growing countries offer traceability systems. 

Blockchain is coming… 

In an industry first, Australian wool exporter Fox & Lillie, Chinese importer SDIC International Trade Nanjing, and the HSBC bank successfully completed a cross-border blockchain transaction. This milestone brings the wool trade one step closer to commercial digitalization.

The parties used Voltron, a blockchain-based trade finance network, to issue and verify a digitized letter of credit.

Blockchain involves the cross-referencing of encrypted data among secure servers.

Fox & Lillie managing director James Lillie called the technology “inevitable” and said that the firm was excited to have taken this “peek into the future.”

Around 43,000 letters of credit were issued into and out of Australia last year, underpinning USD42 billion of trade, according to SWIFT. Trade transactions conducted using blockchain technology allow all parties to review the documents in near real-time, which in turn reduces cost, risk and lead times. It is widely predicted to become a common practice.

Image credit: HSBC. Graph and Table: AWEX

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