AUSTRALIAN Wool Innovation’s 2019 director election represents an opportunity for a change in leadership, research and development, and corporate governance, according to one of the candidates, New South Wales consultant Dr Phil Holmes.
Mr Holmes believes AWI has been largely ineffective in what it is doing and sees his decision to stand in the 2019 AWI election as his legacy to the Merino wool industry he has worked in for more than 40 years.
He said AWI’s R&D program should be aligned with the profit drivers for wool production.
“Essentially there is one with wool production and that is fleece value – how many dollars of wool is being carried on the back of sheep is basically it.
“I don’t care how you get there …. and if you are going to be look at it in terms of fleece value per hectare you are going to have to run those sheep at reasonable stocking rates.”
He said provided a wool flock was weaning 70 percent-plus of lambs per ewes joined, increasing flock fertility did nothing to improve profit.
Mr Holmes said AWI had wasted a lot of money in fertility research which is important in dual purpose and meat flocks.
He said increasing fleece value was next to impossible to achieve without objective measurement.
“So AWI not been funding the research effort properly because Wally (Merriman) and a few others don’t believe in objective measurement, they just don’t.
He said objective measurement, genetics and genomics research has been starved for funds and activity.
“That has to change – no other livestock industry can survive without well-directed R&D.”
Mr Holmes said the irony is if you get wool production right, it has the potential to be the most profitable of all grazing enterprises.
“Over the long-term, drought doesn’t knock a Merino flock around like it does a beef herd or a prime lamb flocks.”
Phil Holmes’ message to AWI shareholders
On the 22nd of November, Australian wool producers will have the opportunity to elect three new directors to the AWI board. This is an important opportunity to facilitate much needed change in AWI and the wool industry at large.
Some background is needed to explain the opportunity and the need for change.
What has caused Australia’s flock reduction?
At this time the national flock is thought to be close to 65 million head. Merinos constitute about 75 percent of the total, so there are about 49 million Merino sheep grazing the Australian landscape. More prime lambs are born to Merino ewes than ewes of other breeds, so not all Merinos are found in dedicated wool-producing flocks. The national flock has not been this small since about 1915. What has caused this?
It’s not all due to the drought
The current drought can explain some, but not all of this. The national flock has been in slow decline in size since about 2001 when the last of the wool stockpile was sold off, with the decline increasing during droughts. The available evidence is that most of the sheep grazed area has been replaced by cropping, followed by some substitution by beef cattle.
Is wool too hard?
My experience has been that many producers give up on wool, finding it too hard. There can be long periods of a low wool price between the price spikes and the micron price premium can disappear as well. If you are a wool producer, about 80pc your total profit for a decade is generated in only three of those ten years. The other seven years seem to test the patience of all but the most perseverant. Ironically, it is no different with cropping or beef production.
Wool can be the most profitable enterprise
Over forty years of accumulated evidence and experience has made it very clear to me that if you get wool production right, it is or can be the most profitable grazing enterprise of all, in the longer term. I cannot recall AWI ever making a statement like that; perhaps because they don’t even know.
One of the key profit drivers in wool production is fleece value. Today there are wool flocks where the average value of the wool on the backs of sheep is at or near $90. Unfortunately, there are too many flocks where that figure is $40 or less. It costs the same in dollars and pasture consumed to run flocks at either end of the fleece value spectrum. Further, it is impossible to select for increasing fleece value unless objective measurement is used; it cannot be done by the eyeball and feel alone. Why hasn’t AWI promoted this concept and built an R&D program around it?
The two components of fleece value, weight and fibre diameter are not grass hungry traits. That is, almost no more pasture is consumed as you continue to select for both of them. It’s a free lunch, unlike beef cattle and meat sheep where many of the important traits need more grass to drive progress.
Re-directing research and development is the big opportunity
So, there is one huge opportunity. Redirecting the R&D effort to fully support progress in key profit drivers in wool flocks and there are more of these than fleece value alone. If this were to be done well, perhaps the ongoing debate on the R&D/marketing spend would start to retreat and more time could be spent discussing topics that really matter. It could be that the marketing spend needs boosting but until AWI produces some evidence on the effectiveness of past marketing activity, we will never know. You cannot consistently make good decisions in the absence of quality evidence.
The AWI board needs change
The AWI board sorely needs new faces and minds. Minds that will ask hard questions and demand evidence before making decisions. Minds that want AWI shareholders to be proud of the well-directed effort and professionalism that could come with a revitalised AWI. Minds that would strive to keep AWI well away from Senate enquiries and major reports criticising poor corporate governance and a wide range of other matters.
Along with Janelle Hocking Edwards and Noel Henderson, I am standing for election as a fresh face and mind. All three of us are completely independent and carry no unwanted baggage; we share a common view on the change needed within AWI. We offer skills and experience on a range of fronts and strongly believe that AWI can be transformed into a corporation that would be the envy of other RDC’s.
It will be your call. It is a certainty that if you vote for the same old faces, nothing much is going to change for the better. You can either vote for one or all of us (rejecting the rest) or appoint any one of us to allocate your proxies for you. If you choose to appoint me, you have my assurance that there will be no allocation outside Janelle, Noel and myself. Please do not just send back an open proxy, as others will decide the future of AWI, not you.
It would be so good and worthwhile to help transform AWI into a shareholder-oriented centre of excellence.