Senator's Wool Report
From the farm to the wardrobe …
a snapshot of the Australian wool industry
Study Leave Report, Senator Concetta Fierravanti-Wells, August 2009
Executive Summary:
The Australian wool industry, which has historically been very important to the Australian economy, is in crisis. Over the past ten years the industry has been under pressure from decreasing market prices, increasing input costs and competing land uses. As a result, the Australian sheep flock has plunged to record lows below 80 million sheep, not seen for the past 60 years.
In an industry with such a long and colourful history, we must challenge the status quo and look for new opportunities. Unfortunately, this is difficult when many of the 33,000 individual wool producers are experiencing low prices and continued negative media, especially regarding the mulesing issue.
As the average age of wool producers is about 60 years, it is understandable that this generation is not necessarily interested in new and innovative options when they have previously experienced the consistently reliable years of wool through the 1960s, 1970s and 1980s. A challenge is to manage the transition of the industry whilst there is still a core base of breeding ewes that can continue to produce the commercial quantities of wool that are required over the next five years to supply Australia's existing markets, and particularly the Italian market, before we even consider new market opportunities.
With the industry at record low numbers, the concern is what steps are required to manage this industry to maintain its crucial value (approx $2.6 billion) and to continue to provide employment across regional Australia. Also, we need to further strengthen the traditional links that have been built over many decades with international processors of Australian Merino wool.
It has been clearly demonstrated that it is critical to firstly concentrate on delivering quantities of quality wool to the textile industry to ensure all stakeholders have the opportunity to retain their position within the industry and secondly, to improve the image and presentation of the wool industry to allow Australia's prized Merino wool to fully exploit the opportunities which exist in this ever changing market.
Key stakeholders have displayed their interest in the wool value chain, including Australian companies investing in downstream businesses. This involvement in the value chain must be further developed to allow clear information flow in both directions to further develop relationships in the changing industry.
When I first commenced my enquiries, I found a publication called the Wool Pages 2008, A Directory of the Australian Sheep and Wool Directory. This is a lengthy publication which is published annually to provide information along the wool supply chain. One only has to look at the diversity of its contents to understand the wide spectrum of activities that are affected by the demand for wool.
If demand for wool is the criteria for determining livelihood, then much rests on the shoulders of those charged with the most important task, namely that of increasing consumer demand for wool. Wool Pages reflect many lives and livelihoods.
In my discussions with various people who have been in the industry for a long time, they have relayed to me that the history of the wool industry has seen the emergence of splinter organisations as disputes have arisen.
What is clear to me is that there is no one cohesive group which brings together all the interests of the wool industry. There is no "go to" body for wool – a body that can make decisions that can be enforced throughout the industry. If division is death, then the wool industry is well on the road to heart failure!
Whilst this fragmentation may have been sustainable in good times, when the industry is in such decline, this fragmentation may end up exacerbating the decline even more.
In the face of continued volatility of prices, continued contradictions in market information and industry infighting, the wool industry desperately requires some clear messages in these challenging times. These messages need to be clear and consistent, both domestically and internationally. This may mean that the industry must face some truths it may rather ignore. However, for the industry to continue to produce the world's leading wool clip, messages from both processors and consumers, must be clearly disseminated to grower organisations to allow for a clear path to be planned moving forward.
The large amounts of time and money invested in research in on-farm production and off-farm processing in the past have resulted in some innovations that offer improvements in both the production and performance of Australian wools. Overall however, there has been an inability to commercial wool research and development over many years. Stakeholders are looking for signs of a solid future for the industry before they invest in new systems within their business.
Australia has developed world leading reporting through the Australian Wool Exchange (AWEX) and wool testing through the Australian Wool Testing Authority (AWTA) which is the preferred testing authority in the global wool industry. This strengthens the message that Australia is the premier country within the global wool industry. With continued exporting to all key markets by established companies, Australian wool is well placed to consistently supply markets that offer acceptable prices.
Continued business with Italy, wool's flagship manufacturer and brand leader, remains the leading opportunity to continue wool's presence in the premium apparel market. By working closely with the Italian industry, Australia's specialty wool producers can continue to supply wools that meet the high standards of this market.
It is important to clarify that the first step in a quality wool product is to produce quality raw wool and quality wool tops. Australia has a demonstrated history in producing the world's best wool; an opportunity exists in specialty wool growers developing a professional relationship with the Italian market to take the steps needed under Mike Guerin's advice below to ask „What do our customers want', and then set in place an action plan to move forward.
In times of continued economic pressures and environmentally aware consumers, wool is well placed to re-establish its position within the textile market. However, to fully exploit this opportunity the wool industry as a whole must base this on a winning strategy, work together and always be vigilant.
Mike Guerin, Managing Director Elders Rural Services summarises the key issues in moving forward:
"In the history of wool, we have never started with the customer and worked back", he says.
"If there's one thing I would say to woolgrowers, and it's just my opinion, it is that we have singularly failed as an industry, ever, to start with a clear view of the needs of the customer and the properties of the product and worked back and produced that. We have always been a production-oriented business. And that's served us well for many years, but that's simply not the way of the world these days.
The success of all stakeholders in the wool industry is intertwined; growers must become more informed of the downstream requirements of its markets, especially, its flagship Italian market.
I would like my report to be seen as a realistic snapshot of the wool industry including the positives and the negatives. My conclusions and recommendations are intended to be thought provoking. Established entrenched views will likely be critical. Others will view them as being in the best interests of the wool industry.
We must remember that if things are done in the wool industry in the same way as they were before, under the same structures as before and using the same systems as before, then the only outcome is the same result as before.