Wool investments lack innovation

Wool investments lack innovation


Wool
John Keniry with son Richard and grandson Will Englund,11, on the family farm, "Kildara", Eurimbla, NSW.

John Keniry with son Richard and grandson Will Englund,11, on the family farm, "Kildara", Eurimbla, NSW.

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THE percentage of wool levies being spent on marketing compared to research and development is under scrutiny as wool production fails to recover during a time of high returns.

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THE percentage of wool levies being spent on marketing compared to research and development is under scrutiny as wool production fails to recover during a time of high returns.

Last financial year, Australian Wool Innovation (AWI) spent nearly 60 per cent of its $76.6 million annual expenditure on marketing and 40pc on research and development.

This compares to a close 50pc split of Meat and Livestock Australia’s $172.4m annual expenditure between R and D and marketing.

Despite wool prices in the past three years performing in the 100th percentile, wool production has plummeted nearly 30pc since 2005/06, from 2.5 million bales to 1.8m last season.

Former AWI board member and Sheep CRC chair, John Keniry, said a lack of R and D focus for the wool industry had failed to improve the costs of production compared to efficiencies generated in other commodities which compete for the same land.

“In particular there has been less focus on the application of modern genetics to wool producing sheep, as compared with the lamb industry which has been revolutionised by the use of more sophisticated breeding technologies,” Dr Keniry said. 

“These days, it is about the sheep rather than about wool or meat. There hasn’t been enough focus on optimising the genetics between meat and wool.” 

He said the reduction in wool production had been mainly in the broader range microns, above 18m, partly due to the relative value of meat to wool.

In the pastoral regions which were traditionally broader wools, shortages of shearers coupled with the increased value of meat led many growers to move to dorpers, while goats had also offered good returns.

He said cropping in marginal areas had partly replaced medium wool sheep due to improvements in technology such as zero till.

Dr Keniry said, greater production gains would stem from a re-evaluation of AWI’s marketing verse R and D expenditure. 

Former AWI board member and Sheep CRC chair, John Keniry, believes AWI should review its investment ration between marketing and R and D in a bid to stimulate production gains.

Former AWI board member and Sheep CRC chair, John Keniry, believes AWI should review its investment ration between marketing and R and D in a bid to stimulate production gains.

“Woolgrowers have not had the opportunity to vote on the proportion of the levy that should be spent on marketing versus research,” Dr Keniry said.

“They have only had the opportunity to vote on the levy and AWI nominates the split between marketing and research.”

The impact, Dr Keniry said, was no clear demonstration levies allocated to marketing were returning revenue for woolgrowers.

An independent benefit cost analysis of AWI’s $4.6 million Campaign for Wool investment from 2009 to 2014 revealed an estimated $0.60 to $4.80 return on every dollar invested, depending on wool sales.

Cool Wool Campaign’s $17.3m price tag from 2011-2016 was estimated to return $3.10 on every dollar.

Mecardo managing director Robert Herrmann said the lack of innovation and production gains in the wool industry had deterred any major swing back to the commodity.

“The idea that we still pack wool in a bale originally designed for a camel to deliver to wool stores, and the major changes to the shearing process in the past 100 years have been the handpiece and the self-pinning wool press does not promote the wool industry as innovative,” Mr Herrmann said.

“The fact that if you walked into a woolshed in full swing 100 years ago, it would be fairly similar to the process we see today.

“That says innovation is not the natural ally of the wool industry to date.”

He said industries were competing for the new entrants to agriculture as well as limited acreage.

“Wool had lost this battle for acres over the last 20 years; in the late 80s the flock peaked at about 170 million, by 2010 it was 70m,” Mr Herrmann said.

“Drought played a part over this time, but the undeniable fact is that wool producers voted with their feet.”

However Independent Commodity Services market analyst Andrew Woods believed the loss of woolgrowers to the industry was financially driven.

“Ultimately if there is a dollar in it, people will do it because the dollar wins in the long run,” Mr Woods said.

“Wool area to crop area has been the big swap in the last 25 years in Australian farming.

“The underlying reason is that the grains industry for decades has had better productivity improvements which have allowed them to squeeze more margins out of their enterprises and as a consequence they’ve captured more acres.”

While there were many factors influencing wool production, Mr Woods said it was an area which critically needed to be addressed.

“While prices are up, volumes are down,” he said.

“From a farmers perspective overall volume isn’t an issue but from a supply chain’s point of view - services providers and processors - we need to see some volume.

“The supply chain has had to shrink to match greasy wool supplies and the ultimate disaster will be if investment in processing machinery R and D stops because there isn’t enough volume to warrant it.”​

AWI communications manager Marius Cuming said the board stopped funding projects that did not “adequately return to woolgrowers”.

In detailing the method for assessing the effectiveness of marketing, Mr Cuming referred to an episode of AWI’s podcast The Yarn.

"AWI is happy to stand on its record of investment in both on and off farm research and development as well as its marketing investments,” he said.

“… There has recently been a call for proposals for new research ideas, all thoughts and innovations welcome.”

In response to whether AWI’s 40/60pc R and D to marketing expenditure ratio would be revised, Mr Cuming said the investment split was “discussed widely” and voted on every three years during Woolpoll where growers decide the future of AWI.

The story Wool investments lack innovation first appeared on Farm Online.

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