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Shandong Ruyi wool buy is no golden fleece

Updated: 2012-3-27 Source: CTEI

WHEN Chinese agricultural corporation and textile processor Shandong Ruyi bought one of Victoria's most prestigious country estates, Larundel, last November for $14 million, it was widely touted as evidence that the foreign purchase of Australia's best farms was out of control.

There was no shortage of critics to fan the fires of xenophobia, with claims the Chinese newcomer planned to poach the best merino fine-wool sheep genetics bred in Australia during the past 200 years back to China to build rival and perhaps even better merino super-flocks there.

The doomsayers predicted it could be the beginning of the end for Australia's domination of the luxury high-priced superfine wool market but the reality is proving much more measured.

"If you had a Chinese company coming here buying land, growing a product and whipping it out of Australia, that would not be something we would want," Australian Superfine Wool Growers Association president Helen Cathles says. "But if that foreign company has a plan which includes a strong benefit to Australia, has money to invest in research and development, and wants to be collaborative with producers, then I think that is a different consideration."

Shandong Ruyi has made no secret that its focus in Australia is increasing production of highest quality ultrafine merino wool.

It is looking to globally dominate the purchase and processing of wool so fine - each fibre is less than 14.5 microns in diameter, much finer than a human hair - that it is the living embodiment of "spun gold".

The Chinese textile group, which has 20,000 employees, is also outspoken about its ambition to ride the surge of affluence in China, creating luxury expensive clothes made from cashmere and exclusive ultrafine merino wool.

Its 100-year plan, detailed on its multilingual website, describes how Ruyi, now in its 55th-year phase, intends to become a global force that is "an international supplier of fine-quality textile products, a leader of the textile-related industry and a provider of top-class products in China".

Within this vision, the impressive 1850s Larundel mansion near Ballarat, with its Paul Bangay-designed formal gardens, its polo field, trout-filled billabong, river beaches, helicopter pad and 1100ha pastoral estate is set to become the showpiece and beating heart of Shandong Ruyi's luxury rare wool endeavours.

The company plans to turn the property - once the grand seat of the wealthy Victorian squattocracy family and fine wool merino breeders, the Austins - into a research and development centre specialising in the genetics and breeding of ultrafine wool.

It also will become the home of a Ruyi-owned and bred stud flock of this elite class of merino.

Ultrafine wool of less than 14.5 microns is the holy grail of textile processing and world clothing production, finer and rarer than the premium cashmere fibre shorn from goats.

Worldwide production of cashmere - which averages 16 microns - totalled 6500 tonnes last year. Australia's 30 specialised ultrafine merino wool growers produced just 120 tonnes.

Its rarity is reflected in its price. Ultrafine wool below 12 microns can sell for more than $1000 a kilogram, 100 times more than the current average price for wool in Australia.

In January, just two months after Shandong Ruyi bought Larundel from veterinary product millionaires Paul and Gay Preat, Cathles found herself in China signing a unique memorandum of understanding between the Australian Superfine Wool Growers Association and Ruyi.

It details how Shandong Ruyi wants to "work together" with Australia's specialist ultrafine growers to strengthen the small and vulnerable sector, currently suffering from low wool auction prices that do not cover the cost of expensive ultrafine production.

Dismissing hysteria about foreign farm owners, Cathles is convinced of the immeasurable positives in having a large Chinese corporation investing so much of its money and future in Australia's ultrafine merino industry.

For wool growers, Cathles says these benefits include the prospect of higher sustained prices, a guaranteed committed buyer and a large and unprecedented injection of capital and research know-how into specialised breeding and production.

In return, Ruyi wants a guaranteed, growing and reliable supply of ultrafine Australian merino wool finer than 14.5 microns, which it will buy direct from contract growers rather than at open wool auctions.

"This isn't Ruyi wanting to come here and steal our genetics; they are intending on increasing their current production of ultrafine merino wool textiles quite dramatically and need us to be part of that business plan," Cathles says.

"As Shandong Ruyi chairman Qiu Yafu explained to me, their philosophy is based on Confucius; he wants to be collaborative, not competitive, and for our wool growers to be as happy, successful and sustainable as his business."