Early-stage wool processing investigation to continue

Sheep Central, November 8, 2022

EARLY-STAGE wool processing is a cost-competitive proposition for Australia under certain conditions and would reduce the impact of a Foot and Mouth Disease incursion, a new project report has concluded.

The project led by peak grower body WoolProducers Australia found the capacity to undertake early-stage processing of up to 50 percent (170 million kg) of Australia’s wool clip would reduce by $1.1 billion the impact of an FMD incursion in the peak affected year after an outbreak.

Deloitte Access Economics’ report released today also found that the scouring and carbonising components of early-stage processing would be cost-competitive in Australia with current supply chains on a cost to customer basis.

Australia currently relies on offshore early stage processing capacity to process 95pc of its annual wool clip. The Federal Government backed WoolProducers Australia in the project called ‘Ensuring a sustainable future for Australia’s wool supply chain’ to examine domestic and diversified early-stage wool processing to mitigate the trade risk the heavily export-exposed industry faces.

While labour and energy costs are higher in Australia, there is a significant advantage in domestic early-stage wool processing in terms of freight efficiencies and “days-to-customer” basis, the report found.

“The results that we’ve modelled here are really a central case built on a range of scenarios.

“While it shows that scouring is cost-competitive, there is a range of ways to cut it and certainly it’s very close, but I think it really demonstrates that Australia is in the ballpark and with the right mix of commercial structure and operations it certainly would appear to be cost competitive,” Deloitte consultant Jack Mullumby said.

However, Mr Mullumby said the same conclusion is harder to draw for subsequent dry processing, largely because of the associated high labour cost. He said under specific circumstance early-stage processing in Australia could “absolutely be viable again,” but a key question in potentially “splitting” the processing supply chain is who does Australia partner with to undertake development.

Mr Mullumby said a key recommendation in the report was to build relationships with existing processors and “finding the market to build the demand.”

“We think the only way for this to be long-term viable is through a demand supported growth and we would encourage you to look through the findings of the report with that lens.

“Yes, we absolutely are finding that under specific circumstances, building it can be cost-competitive, but ultimately (to your point) someone needs to buy it.”

Report shows onshore early-stage processing is a genuine proposition

WoolProducers Australia chief executive officer Jo Hall said the report has shown that onshoring early-stage processing to Australia is a genuine proposition for the global wool industry into the future.

“Given the significant impact that some of the modelled trade disruptions could have on both the wool industry and the broader Australian economy, it’s certainly worth a further look.

“An increase of early-stage processing capacity to 170 million kilograms could increase Australian GDP by up to $1.8 billion and lift employment by 582 full time equivalent jobs,” she said.

“That’s great for our industry, great for regional development and great for the Australian economy.”

WoolProducers looking at opportunities for next phase

WoolProducers Australia general manager Adam Dawes said this first stage of the project was to look at the feasibility of different options and pathways.

“Now that we’ve started to identify that there is some clear promise on both commercial terms and risk management terms, the next proposed phase of the work will explore some of those concepts in more detail.

“So, specific costs of operating associated with regional verus per-urban location …. specific offshore locations and also costs and different supply chain adjustments that might be needed to integrate different operations under an enhanced or evolved supply chain.”

Mr Dawes said the project revolved around a “stop go process” depending on the results of the first phase.

“We’ve now determined that ‘a go’ is warranted based on the preliminary findings and we are looking at opportunities to explore that further in the next phase.”

WoolProducers successfully applied for a grant to undertake the project under the Commonwealth Government’s Agricultural Trade and Market Access Cooperation (ATMAC) grant program. Deloitte Access Economics was guided in the project by an industry steering committee.

Ms Hall said the wool textile supply chain is one of the most complex agri-product supply chains in the world.

“Given we only have sovereign capacity to domestically process five percent of our clip, our heavy reliance on offshore early-stage processing presents some emerging risks that we have been able to assess through the ATMAC grant.

“During recent years, WoolProducers has become increasingly concerned about the material impact that trade disruptions could have on our wool market,” she said.

“These disruptions can occur though freight and logistics issues or through the imposition of tariff and non-tariff barriers.

“One key example of this would be if Australia was to suffer an outbreak of an Emergency Animal Disease (EAD), such as Foot and Mouth Disease (FMD).”

The report outlines the financial impact of various risk scenarios, including the imposition of tariff and non-tariff trade barriers and an EAD incursion.

The project steering committee membership comprised of representatives from WoolProducers Australia, Australian Wool Innovation, the Australian Council of Wool Exporters and Processors, the National Council of Wool Selling Brokers of Australia, the Australian Wool Testing Authority, the Australian Wool Exchange and Austrade.

“WoolProducers is proud to have shown leadership in this space to achieve industry good outcomes and thank the commonwealth, the industry steering vommittee and those supply chain partners that have participated in consultations.

The contributions received from Michell Wool, E.P. Robinson and Victorian Wool Processors were invaluable,” Ms Hall said.

“WoolProducers looks forward to working with the Commonwealth and industry in the next stages of this work.”

The project’s final report is available on the WoolProducers Australia website or can be accessed by clicking here.


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  1. Peter Small, November 9, 2022

    Andrew Farran’s well-presented arguments commences what may be a vigorous debate on the issue of early-stage wool processing in Australia, but I am not holding my breath.
    Jack Mullumby’s presentation had the stench of consultants setting up a case for further government funding.
    Australia has a disturbing trend; it is fair game to help our “mates” get their fingers into the government till. The government’s coffers are there for us all to plunder.
    Is there a member of the steering committee who has any memory of the debacle of the government investment in early-stage processing in Australia in the 1990s? And the changing economic conditions since then that has further destroyed Australia’s economic competitiveness in this area.
    At this stage of the economic cycle, governments should be withdrawing money from the economy, not pumping it into these sorts or hair- brained schemes. We are all taxpayers who in one way or another have to foot the bill, either by paying more taxes or through inflationary costs such as interest rates.
    One would have thought that WoolProducers and our industry bodies would have been alert to all these matters, but apparently not.
    Are we becoming a nation that spends more time thinking about how we get on the government ‘tit’, rather than getting on doing innovative commercial things that increases ours and our nation’s wealth?

  2. Andrew Farran, November 9, 2022

    It’s surprising that on the face of things it seems that little consideration is being given to past experience in this area, especially recent experience with Australian top makers in the 1980s.

    Firstly, costs can blow out in the context of industrial relations. Secondly, one needs to be onside with downstream buyers and users. No assumptions can be made in that regard. The saying that if it ain’t broke, don’t fix it, comes to mind.
    As for tariffs, they are against the trend of the times and it would be surprising if this became an issue, unless the objective is to displace early stage processing in downstream least developed countries. Beware.
    It would be better to concentrate on producing upmarket quality wool and hybrid products than regressing back to the 19th century.
    The argument for early stage processing is getting rid of tons of soil and weeds before shipping.

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