Agriculture Minister David Carter wants changes to the way New Zealand strong wool is sold but said farmers must drive any change.
Opening the Natural Fibres in Australasia conference at the University of Otago yesterday, Mr Carter said the status quo, where virtually all strong wool was sold at auction, was not an option due to falling prices and demand.
"The status quo is untenable if the strong wool industry is to have a future in New Zealand."
A farmer and wool grower himself, Mr Carter said he no longer supported the auction system, saying the industry was too fragmented.
"There are too many players out there trying to survive in what is a difficult market."
He said crossbred wool growers only needed to look at the New Zealand Merino model as an alternative, saying the grower-owned marketing company had changed the perception of wool from a discounted commodity to a high-value, differentiated fibre and linked producers to end users through long-term supply contracts.
Prices for strong wool, which was primarily used in carpets, had steadily fallen for the past 15 years to the point where the fibre was becoming a by-product of meat.
There was a risk the industry could lose generations of sheep breeding which had made New Zealand wool the highest quality in the world.
Mr Carter said Theresa Gattung, the chairwoman of a new farmer-owned marketing company, Wool Partners International (WPI), recently returned from a trip to the United States and told him users would pay more for wool because they realised prices were not sustainable, but with the auction price falling, asked why they should.
Mr Carter was optimistic the fortunes of strong wool could be turned around because of its quality, and it was produced naturally and sustainably, something its synthetic competitors could not boast.
"Consumers are demanding products that are environmentally sound. Synthetics are certainly not produced with the same clean, green, natural image as wool."
Two alternatives to the traditional auction were available to farmers: WPI and Elders Primary Wool, which were both looking at contracted supply which linked users back to growers.
In addition, Mr Carter said high meat prices meant farmers had the ability to invest once again in strong wool initiatives that would make changes.
In response to a question whether the New Zealand strong wool industry should be handled and marketed by a single company, Mr Carter said he favoured some competition as a way of keeping players honest.
But he wanted to see some consolidation of brokers and exporters.
"Any consolidation we can get in the future has to be better than what we have got now."
Speaking after his address, Mr Carter urged farmers to look at the options and be involved in the debate, but said he would not lead the discussion.
