Merino ewes and lambs, Image – AWI-Woolmark.
THE PROMOTION versus productivity debate is alive and festering in Australia’s wool industry, and was highlighted at recent industry group consultation meetings with the grower levy and taxpayer-funded Australian Wool Innovation.
AWI on 11 February met with its Woolgrower Industry Consultation Panel and followed up with a meeting with the broader Woolgrower Consultation Group the next day to help determine its strategic plan and levy expenditure for the next three years.
On 17 February, Sheep Central published AWI chairman Jock Laurie’s impressions of the consultation meetings’ deliberations.
In this piece, Sheep Central talks with a major New South Wales wool grower with a productivity focus who attended the WCG meeting. The wool grower did not want to be identified to avoid personal industry discrimination or against the organization represented.
A scant WICP meeting report released by AWI said among the industry priorities highlighted were marketing and research programs to maintain and defend wool’s reputation and drive growth, research and extension, shearer and shed hand training, and domestic engagement.
A report on the WCG meeting by facilitator Scott Williams said “the overall message from the WCG to AWI was that all of its current programs are important and need to be continued as far as possible.” The report said productivity initiatives other than shearer/shedhand training and wool harvesting alternatives remain important. And it said the Merino Lifetime Productivity project has yielded a massive data set, and the WCG expressed confidence in the structures established to prioritise its analysis. Other productivity R&D must be prioritised to deliver the greatest impact, the report said.
However, the wool grower has queried why productivity was not specifically mentioned as a high priority in the WCG meeting report and didn’t think the meeting report was a fair representation of discussions.
On reading Mr Laurie’s comments in Sheep Central after the WICP and WCG meetings, the grower disagreed that there is a major industry push for more marketing.
“That was not the case.
“There was not a major push for more marketing,” the grower said.
“Although the WoolProducers Australia study (Factors Influencing the Australian Wool Price) might not have got everything right, certainly the trend is there where all the money that has gone into marketing has not worked in the past.
“I pushed pretty hard to try to get the industry to change or at least understand to get more productive animals with productivity as a priority,” the grower said.
“And Jock (AWI chairman Jock Laurie) in his closing address to the WCG meeting said AWI would concentrate more on productivity and make our sheep more productive, but this did not come through in the Sheep Central article nor to a great extent in the WCG report.
“Productivity was mentioned in the report, but not to the extent that Jock was talking about it at the meeting,” the grower said.
“Unfortunately there was a push among some of the stud breeders for more promotion.”
The grower got the impression that AWI achieved what it wanted from the WCG meeting; that is to continue its marketing activities as before.
“I was one of the few commercial wool growers there, the room was basically full of stud breeders and look where the stud breeders have got us – not very far at all.”
Merino breeder groups dominate consultation groups
Referring to the ushering of several Merino and other sheep breeder-based groups onto the WCG and the WICP in recent years, initiated during former AWI chairman Wal Merriman’s leadership, the grower said the groups are “absolutely” dominated by sheep breeder groups.
Four of the nine member bodies represented on the WICP are breeder-based groups. The membership includes ASHEEP, the Australian Association of Stud Merino Breeders, the Australian Superfine Wool Growers’ Association, Australian Wool Growers Association, a broad wool representative, the Commercial Merino Ewe Competitions Association, MerinoLink, Pastoralists & Graziers Association of Western Australia and WoolProducers Australia.
An analysis of the Woolgrower Consultation Group’s membership shows that 9 of the 20 member bodies are from sheep breeder based groups, and seven are stud Merino-based groups. The WCG membership includes AgForce Queensland, the Australian Dohne Breeders Society, the Birchip Cropping Group, Flinders Merino, the Liebe Group, Livestock SA, Mallee Sustainable Farming, Monaro Farming Systems, the NSW Farmers Association, the NSW Stud Merino Breeders’ Association, the Queensland Merino Stud Sheepbreeders’ Association, the SA Stud Merino Sheepbreeders Association, the Stud Merino Breeders Association of Tasmania, MerinoLink, the Stud Merino Breeders’ Association of WA, $uperBorders, the Tasmanian Farmers & Graziers Association, the Victorian Farmers Federation, the Victorian Stud Merino Sheep Breeders Association and the Western Australian Farmers Federation.
The grower said the members of the WCG had no voting power.
“There were 25-30 wool growers in that room, most of them were representing an organization.
“What the bloody hell do all these organisations do?”
The grower said the stud breeder group dominance of the groups was impacting AWI’s priorities.
“Absolutely, (former AWI chairman) Wally Merriman was there (as the Australian Superfine Wool Growers Association’s representative).”
The grower said Mr Merriman’s presence at the WCG meeting was “absolutely not” a positive development, because of his “very conservative” approach and focus on marketing.
“What happened when Wally Merriman was in charge?
“More money went to marketing and where has our funding gone? Out the door.”
WoolProducers report got fair hearing, but no debate
The grower said the WoolProducers study (Factors influencing the Australian Wool Price) showed that there is no correlation between marketing and additional dollars in growers’ pockets.
“It got a fair hearing, but there wasn’t really any debate.
“WoolProducers obviously knew they were in the gun when they got there and it was just such a conservatively held meeting,” the grower said.
There was ‘negativity’ directed at WoolProducers representatives by some of the stud breeders, the grower said.
“A lot of people were saying it (marketing) doesn’t pay, but we don’t know what else to do, we’ll throw more money at marketing – that was the impression I got out of it.
“They don’t like to think about productivity – the wool industry has got itself in this hole and it needs to pull its finger out of its arse and figure out how to get out of it, rather than throw more money at marketing, which doesn’t work,” the grower said.
“I question why we are looking for new markets when we can’t even sustain what we’ve got.
“Wool needs to be pulled through the pipeline, you can’t push it through; it’s like trying to shovel a marshmallow into a money box, it doesn’t work,” the grower said.
The grower said the lines are blurred between what is a marketing campaign and what is regarded as defending the fibre, such as AWI’s work on how wool is seen under the European Union’s Product Environment Footprint legislation.
“Certainly I believe there needs to be a lot more spent on research and development so we can breed more productive animals.
“If we can grow a 25 percent higher fleece value then we can offset our costs — I’m saying fleece value, not kilograms,” the grower said.
Reversing the 60:40 marketing: R&D split is justified
The grower is not so much worried about whether AWI is sticking to a 60:40 marketing: R&D levy expenditure split, as much as about where the line was drawn between defending the fibre and marketing it.
“But we can’t keep having study after study after study.”
But the grower believes a reversal of the ratio to 60 percent R&D:40pc marketing expenditure is justified.
“But I don’t think the ratios need to be exact, even if it is 50:50 I don’t care, but we need to be able to have more productive animals.
“The obvious one is Sheep Genetics; if we didn’t have Meat & Livestock Australia tipping money into it, where would the genetic advances be for the wool industry, they wouldn’t be there.”
The grower believed there was a need for greater collaboration between AWI and MLA, but said AWI was not focusing on tipping money into genomics projects.
“If they (MLA) wasn’t there nothing would be spent, remember Wally (Merriman) dispensed with the nucleus flock.”
There was no discussion about AWI spending more on genetic programs at the WCG meeting, the grower said.
“So there was no discussion really about what is going to drive the industry forward.
“There were a couple of mentions of productivity when I was banging on about it, but there was certainly not an emphasis on driving it forward in that regard,” the grower said.
“Look at the productivity gains of lamb, beef, chickens or pigs, or even bloody BHP, they’re keeping above CPI; what’s wool doing?
“Wool productivity gains have been about 0.03pc, bugger all, so how can we stay ahead of the cost curve or even keep up with CPI for productivity? We can’t,” the grower said.
“No one’s thinking about productivity … AWI’s budget is limited, I get that, that’s fine, but I think their thinking needs to change.
“They’ve got some very very good people working there, but I was disappointed when I read (AWI chairman) Jock Laurie’s comments in Sheep Central and there was hardly a mention of productivity.”
The productivity gains in the pork industry weren’t made by selecting the prettiest pigs.
The issue of the future of levy-funded research, development and innovation in the wool sector needs well-informed discussion, especially around capacity to effectively address sector-specific challenges and threats, and whether the current structures and processes are future-fit – including as relates to the influence of activist shareholder groups.
So as someone privileged to have served growers through AWI including 3 stints leading the on-farm R&D portfolio, I’d like to correct what I consider to be unhelpful, selective and misleading retelling of AWI’s history. Keating’s famous horse called ‘Self-Interest’ is off and running, in this case out of a dam called Academia and by a sire called Quantitative Genetics.
The decision not to invest in what became the MLA Resource Flock Project was an extension of the decision not to continue to fund extension of the then Sheep CRC (2007-2014), and dates back to 2009.
AWI had made clear in writing to the then CRC leadership (Nov 2009) that it was not supportive of an extension bid by the CRC (at the time less than 2 years into its 7 year term) since it was dealing with a very tight budgetary outlook, but that it would honour all existing funding commitments and indeed find additional funds to fast-track commercialisation of CRC wool-program outcomes.
At the time, AWI was under massive budget pressure due to the impact of the GFC (levy income dropped by ~24%), coming as it did on top of the decision by the McLachlan-led AWI Board to re-merge with Woolmark and divert a significant share of income to generic marketing, the cumulative impact of the then steadily rising AU:US$ (approaching parity), and the unsustainable run-down of company reserves which had declined from $116m in 2003/04 to $54m by end-2008/09.
A consequence was that the on-farm R&D budget was to be essentially halved. Following the resignation of the then on-farm portfolio manager, I was asked by the then Board and CEO drop some other consulting work I was doing and temporarily lead the on-farm team through that unpleasant process while the replacement team leader was found.
It was very tough for the staff and especially our R&D partners, but AWI’s on-farm spend reduced from $18m in 2008/09 to $9.6m for 2009/10 and then $9m for 2010/11.
So, the context is that there was bugger-all money in the kitty to take on more speculative genomics spend after what we’d already put into the SheepGenomics Program and committed to the Sheep Industry CRC, especially since AWI had started to take on a lead role in supporting wool growers affected by wild dogs nationally.
Others are better placed to comment about the Board decision-making process regarding the CRC extension over the 2011/12 – 2012/13 period, but my recollection is of intense discussion about spending priorities, the lack of any real wool-specific outcomes or innovation in the proposed extension of the nucleus flock, and market failure considerations: something many who loudly protested never talked about at the time or since.
While it will only ever be a hypothetical, there may have been capacity to spend on the CRC extension bid and the MLA Nucleus Flocks if the decision by McLachlan’s Board in 2006 to re-merge with Woolmark had not been taken. Yet that would not have justified the spending, and notably missed by these critics is the discipline of mounting a sensible argument addressing the question how would the extra genomics spend on the Genomic Resource Flock have helped a Merino grower?
I strongly doubt that if we had made those investments, an additional bale of wool would have been grown or sold, since the biggest issues affecting both are (a) flies and vertebrate pests, (b) harvesting costs and shearer availability along with general farm labour availability, (c) our ability to get better at turning rainfall into year round pasture biomass, and (d) international wool price and consumer market dynamics.
If we had made those additional genomic investments, we probably would probably now be dealing with:
– consequential cuts to our spend on predation, harvesting, mulesing alternatives, extension, environmental credentials, and other genetics projects such as the MLP
– beneficiary geneticists, academics, and stud breeders who like to see spending on these genomic tools pointing to ex-poste benefit-cost analyses claiming additional massive benefits from projected commercial translation of estimated additional genetic gains but failing yet again to count the real-world costs of subsidising this particular pet interest.
It is notable that those making critical comments made fail to mention the on-going benefits coming out of the Sheep Genetics (MerinoSelect and Lambplan) pipeline, that the Merino sector continues to make excellent genetic progress (check any MerinoSelect Genetic Trend Report), and that those who wish to invest in the tools (ASBV’s and SNP tests) have the ability to do so – and discretionary investment choices. They also fail to mention that AWI, having made the tough call in 2015/16 that there is no market failure requiring them to subsidise MLA’s operation of SheepGenetics, has continued to invest in wool-related research gaps affecting the across-flock genetic evaluation system with the genomic data therefrom flowing into the sheep genetic evaluation space.
There is also the inference that genetic progress cannot happen outside of their preferred set of tools – a pretence the AWI-supported SARDI Selection Demonstration Flock debunked.
So, on balance I think the comments I respond to are mostly about playing the man (Wal) and not the ball (investment decision-making realities) and read mostly like agitation that a preferred subsidisation space didn’t get more subsidy. I think the importance of RD&E to all agricultural industries, the massive sacrifice made by Australian wool growers in supporting their levy investments, and the significant challenges we all face, deserve better.
Congratulations to your anonymous wool grower on his analysis of the problem of the Merino stud industry having such a disproportionate and negative influence in the debate about the relative value of spending wool growers’ money through AWI on promotion or research. He should not be surprised that stud owners want to spend most of the money on promotion. Look in the farm journals around sale time and see the amount of money they spent on advertising their own animals’ bold sirey heads, outstanding outlooks, well-nourished fleeces and other unverifiable nonsense.
The price and demand for wool suggest that AWI’s advertising dollars haven’t had much success. And, even if it did, one thing is for sure. Every dollar spent on marketing/promotion/advertising this year will have to be spent next year and every following year just to maintain the status quo. When money is spent on research into better productivity, as your wool grower describes it, it finds a new technique or procedure that increases productivity, that can last for decades. An outstanding example of this is, of course, the introduction of myxomatosis. Those people who can remember the rabbit plagues before myxo will appreciate the value to the wool industry that that single piece of research bought. At the time, the pasture being eaten by rabbits each year was estimated to feed about 50 million sheep. And, 70 years later we are still reaping the benefit which must now total several billions of dollars.
Your wool grower was not very complimentary to Wally Merriman, the former chair of AWI and well-known stud master. It was he who oversaw AWI’s unilateral decision to spend money in the proportion of 60pc promotion to 40pc research. He also said in 2013 that he didn’t think research could tell the sheep industry much that they didn’t know, and that he thought a 90:10 ratio might be more realistic. As the leader of a research organisation and one that had funded a lot of valuable research for the industry over the years, he was certainly not very encouraging, as your wool grower points out.
He also points out the huge gains in productivity that have been made in the lamb, beef, chicken and pig industries. Data from ABARES since 1940 was used by David Lindsay to show the difference between the productivity of dairy cows and wool producing sheep in the 70 years between 1940 and 2010. The graph shows that the average cow in 2010 produced 300pc more milk than her ancestor in 1940 did, but the average sheep produced only 12pc more wool.
When AWI commissioned a consultant to justify their decision to cease funding jointly with MLA, the Information Nucleus Flock, the criterion used was whether stud breeders got more money for rams that were accompanied by modern genetic information like breeding values, than for rams sold on centuries-old visual criteria. The consultant found that they didn’t. So, continuing to improve and promote the use of modern genetics was deemed uncommercial. The consultant, who had no traceable history in genetics or research did not look at the prospective benefit that might accrue to commercial wool growers, in other words, about 99% of the industry. Therefore, successful commercialisation was defined as being when 1pc of the industry made more money at the expense of the other 99pc who would pay more for their rams after having paid in the first place for the research that underpinned the better animals. If genetic research can improve the efficiency of production of wool and continue to do so, then it, too, should not be impeded by micro-management considerations about who within the present structure might gain short term benefit, or worse, by having intermediate players hold up progress in the industry because they do not see adequate short-term benefits for themselves.
There is certainly a good case for expanding the debate as Sheep Central suggests if wool is going to be a competitive fibre into the future.
Good on that grower for standing up against the “group think” stud breeders who are using AWI to fund their hobbies.
I fully understand the bullying that goes on in these wasteful meetings, I have been a target too.
The question for the AWI board and their stud breeder masters is, how small do they want the Australian wool industry to be?
Productivity is the problem. In the group breeding scheme I have been a part of for 30 years we can get close to 3 percent if we do everything right.
I don’t try to talk to stud breeders about EBVs anymore, I just ask them what sort of cattle they run. When they reply Angus they have just answered the question.
I am running merinos in Armidale, NSW. I also do a lot of contract pregnancy testing and lamb marking in northern NSW and southern Queensland.
There are two reasons why my clients are reducing sheep numbers or going out of sheep…….
Dingoes and worms.