Frequently Asked Questions

What is Prime?
PRIME is a partnership between Primaries’ Clients, Primaries and The Merino Company (TMC).  This partnership aims to build long term relationships with Customers (retailers/retail brands) who sell wool based products to the final consumer. These relationships are the platform to deliver stable and sustainable returns to clients and continuity of quality and supply to the customer.

How does Prime work?
Clients contract wool to the PRIME wool ‘pool’ managed by TMC. TMC then performs three key services to deliver value to Primaries clients.

1. Marketing
P = Partnership: Target particular Customers and develop partnerships.

R = Relationship: Initiate and build relationships with target customers.

I = Innovate: Develop innovative quality product solutions that meet the needs of the Customer’s consumer base with  wool from the Prime pool.

M = Marketing: Develop innovative marketing strategies to differentiate your wool eg. Austral and Generation W.

E = Execute: The marketing plan.

2. Pool Management

TMC will use a variety of methods to sell PRIME wool; marketing contracts with long term customers, hedge product using derivatives such as futures or options, forward selling and optimally timed spot selling. In this role the Pool Manager operates like a Funds Manager.

3. Supply Chain conversion

Managing the supply chain and engineering innovative quality product solutions.

How will the Prime wool pool be sold?
Wool will be sold via marketing contracts with downstream customers. These marketing contracts will come through the TMC sales and marketing teams around the world. The remaining wool will be “funds managed” using various spot, swap, forward and derivative related sales based on the spot or commodity market or forward commodity markets with the aim of delivering greater returns than the average spot price. TMC will earn a 2% fee for Pool Management to be deducted from the pool sales (with a 1% bonus, if the revenue from the pool is greater than 10% above the spot average of the wool in the pool over the pool period). 

For clients who are interested, when must contracts be signed?
The pool year runs from 1 July to 30 June and contracts usually need to be signed before the pool year begins. In season 08/09 clients have until 3 November 2008 to contract to PRIME because of the introduction of the new payment system!  These contracts specify the quantity and month that wool will be delivered to Primaries for the pool.

How will Prime Merino wool be marketed?
An important service of TMC is to develop relationships to secure marketing contracts with downstream Customers.  These customers include retail brands such as Woolworths in South Africa and manufacturer brands like Driza-Bone Activ, Asics, Instyle and St John Knits.  These contracts lay the platform for long term stable business relationships with the Prime pool; they can only be developed by marketing the attributes of the wool fibre and tailoring marketing and ingredient brand solutions for individual Customers.   Using the worldwide TMC sales network a large number of customers can be introduced to differentiated wool ‘brand platforms’ and serviced well, to ensure continuing relationships and customer programmes.

How will these marketing activities be paid for?
TMC will earn a Marketing Fee of 3% of sales value from the pool revenue, this will contribute to the cost of developing these markets for the pool.

Will clients be informed of these marketing activities?
Prime will regularly communicate with pool participants to inform them of the financial performance of the pool as well as updates on customer relationships and marketing initiatives. Information will be provided via quarterly newsletters and the website www.prime-wa.com.  There will also be opportunities for pool participants to meet some Retail Customers through specially organised functions. Notification of these will be communicated both through newsletters and through your Prime Representative.

Do I have to sell my wool this way if I want to continue to use Primaries as my broker?
No, not at all.  This pool initiative is voluntary and you may put in all, some or none of your clip. 

When do clients deliver their wool to Primaries?
Clients will have from the 1st July 2008 until 30th June 2009 to deliver their wool (no wool can be delivered after this date) to the 08/09 season pool.

Can I select the lines of wool to enter this system?
Selection of lines will be conducted by Primaries in consultation with you. Lines will not be split.  We will be fair in acknowledging that certain specialty lines you may wish to be marketed in traditional ways.

Have I any say as to price and time of sale for committed wool?
No. You, as the producer, are having the sale, risk and final returns managed for you by TMC through the pool, irrespective of your delivery time.

When will I receive payment?
You will receive a Delivery Payment based on 80% of the Pool Entry Value (PEV), within 28 days of the end of the Delivery Period in which your wool is completely delivered into store. The Pool Entry Value will be based on the most recent spot price grid available once your wool test results and types are available.

The Final Payment will be made after the pool closes on 30 June and by the end of September 2009, allowing 3 months to finalise all lots in the pool for that season. The Delivery Payment will be deducted from the Final Payment with the Final Pool Return determined using the standard pool calculation % method.

Your brokerage and testing costs plus any shearing advances will be deducted from the Delivery Payment and Primaries may deduct any outstanding costs from the Final Payment.

Can I receive a cash advance?
A shearing advance may be available from Primaries, please speak to your local wool representative. Any advance will be deducted from the Delivery Payment you receive.

Is my wool in the pool secure?
It is important to note that the title on your wool transfers from you to TMC Pools Pty Ltd upon the Delivery Payment.  The past performance of the pool has shown that the returns generated have been above the average of the season. This fact and the Pool aim to return more stable and sustainable long term pricing for your wool should give you confidence. TMC Pools Pty Ltd is a special purpose vehicle established to attract commercial funding against its wool assets, to provide cash flow certainty through an upfront Delivery Payment for participating clients.

What are the other premium opportunities in the Pool?
As there is demand for wool with certain attributes, we are applying premiums within the pool for verified, compliant lots. These premiums are payable on EU Eco-label compliant lots (3%), a Farm Management Plan or EMS externally audited (3%), and for clips which meet the Ceased Mulesing (1%) and Never Mulesed (3%) categories, for a producer who has ceased the practice of mulesing. Please refer to the TMC Mulesing Policy. All premiums must be verified with the appropriate declaration (Mulesing/Eu Eco) or certification (Pesticide Residue test & EMS certificate).

What is the Payment Equalisation?
Some clients will deliver to the pool early while others will deliver later in the season. Wool received in September may be sold early and can earn interest for the pool compared to the deliveries late in June. Therefore, the equitable method of distributing these earnings is to establish the recognised date of title transfer and calculate the pool contribution or any remaining grower equity. If the pool is cash positive during the pool period it will attract interest at the short-term money market rate. This applies to the final lot value of the remaining pool equity (as the 80% Delivery Payment has already been made).

How is my return from the pool calculated?
Firstly the percentage of a client’s contribution to the pool is calculated after typing the wool and giving it an averaged spot price for the entire pool period.  This percentage of the pool then determines the portion of the pools end of season revenues.  Details of this process are outlined in an example below.

What are the income implications?
Both the Delivery Payment and the Final Payment will have GST applied to them and therefore should be considered income in the period received. Wool levy will be deducted from the Delivery Payment with the balance of the levy deducted on Final Payment. We recommend that you consult your accountant regarding these payments.

How can I find out more about Prime?
You can fill go to the Enquiries section on this website and fill in your details and a Primaries Representative will contact you or contact the Primaries Office on 08-9434 1622.