AUSTRALIAN Wool Innovation is making a mistake to manipulate growers to pay more wool tax at this year’s WoolPoll ballot.

With grower’s viability and confidence currently under severe challenge, more wool tax will result in lower wool production.

2024 is a WoolPoll year; a vote every three years to decide if AWI has a future, and how much growers are prepared to give them for research, marketing and development.

I consider the WoolPoll article in Beyond The Bale June 2024, the ins and outs scenarios in the WoolPoll voter information memorandum and linking AWI’s China spend to sales over recent years, subsequently debunked, amount to attempts to manipulate the WoolPoll result.

Currently 1.5 percent of tax is deducted by the Federal Government from grower’s gross wool sales. It is deducted before they pay the shearers, feed the dogs and buy groceries, regardless of whether they make a profit or loss.

Unfortunately, AWI is not reading the room by expecting more wool tax to solve their budget problems. AWI strategy over the last 10 years needs to be questioned. AWI has been a laggard in research and extension by refusing to fund and promote cutting edge technology.

Key market intelligence has been withheld from growers. Marketing is old, confused and generic.

Firstly let’s look at the past year, current conditions and future projections. This includes several major threats to Australian wool production:

1. The Eastern Market Indicator (EMI) is at an eight-year low (other than a brief time during COVID lockdowns) and more than a 10-year low in USD terms.
2. The Australian Wool Production Forecasting Committee shows wool production down more than 3 percent for last year and more than 10pc for the current year. A disaster unfolding.
3. China currently buys 85pc of Australia’s wool production, and is projected to have ongoing GDP growth of around 5pc, almost half compared to the previous decade or more.
4. A very poor season/climate change has been devastating across southern Australia during 2024. Add this to the Bureau of Meteorology and media scare-mongering about a severe El Nino forming in 2023 — that did not eventuate and usually does not have much impact during spring/summer anyway — also smashed confidence.
5. “The-cost-of-living-crisis”: Falling returns from sheep farm businesses due to lower sheep sale values, delayed sales and lower wool prices have coincided with increased costs: wool harvesting, rates, insurance, freight, labour, interest plus extra sheep feeding.
6. The percentage of Australia’s wool greater than 23.5 micron is currently increasing as the total wool production is declining. This is on the back of record mutton production as the flock declines.

Lamb producers who have used ‘composite’ genetics with many producing wool greater than 32 micron are finding shearing a loss-making process. It is expected that many will gradually adopt non-wool breeds.

7. Industry has decided to implement an electronic (EID) National Livestock Identification System (NLIS) starting in 2025. That will mean sheep that previously were required to be tagged with a ‘flock’ tag costing around 40 cents will need a $2 tag. Approximately 38 million lambs tagged each year will cost $76 million, an increase from around $15 million. From 2025 extra costs will be incurred with on farm scanning compliance required.
8. AWEX introduced eBale in 2023: new wool packs with RFID and QR capability, adding to growers’ cost and compliance by millions each year. More compliance will come when AWTA introduces a new traceability hub in 2025. This will be an addition to a number of privately funded accreditation programs already working in the industry.
9. MLA/AWI sheep producer intentions survey in May/June 2024 shows grower sentiment is weak. Forecast intentions for 2025 show a 9pc decrease of ewe numbers (-4.5 million), plus a 17pc decrease in wether numbers (-1.5 million).
10. The Federal Government’s threat, and then decision, to ban live export has hit the sheep market hard, through 2023 and into 2024, across Australia. Grower confidence is low, the store market has crashed with few signs of recovery, other than lamb and mutton. Flock dispersals are common.

Simon Quilty, analyst for Global AgriTrends, was quoted on Sheep Central as saying “people are exiting the business in the sheep game. It’s happening in SA, WA and NSW in particular, people are getting out.”

An increase in wool tax at WoolPoll 2024 will create a further disincentive for growers, already under duress, to stay in the wool industry. It is not the time to do it.

Just like most business in the current environment, AWI needs to reassess its role and effectiveness in serving the industry. AWI needs to deliver growth and prosperity for growers, not be another cause of decline.

Part 2: Why have AWI’s strategies failed to deliver growth and prosperity?

Leadership. The current board controls the board nomination process, that largely decides who is on the board. It represents a conservative sheep breeding faction. Unlike the lamb and beef industries, it has turned away from cutting edge technology such as genomics and genetic breeding values.

Remember, the laggards at AWI stopped funding genomic research with MLA in 2013. AWI also stopped funding the MerinoSelect database and gave up a 50pc ownership IP, and then stopped funding research into wool traits in the Sheep CRC Nucleus flock.

Ironically, AWI had to scramble to access these tools when data from the MLP started being collected. It is hard to estimate the cost to growers and industry of these lost opportunities.

Extension. There are many examples of the current AWI board’s laggard extension strategy.

One is an AWI extension course about “stockmanship and visual classing” that had no genomics or breeding values components included. Another is the AWI “Winning with Weaners” workshop, which I sent a staff member to last year. It is hard to believe, but there was no mention of genetics, breeding values or genomics.

Genomics and genetic breeding values are tools that can solve many problems for sheep breeders, yet still allowing them to breed the sheep and fibre they desire. Fly, dag, worm and footrot resistance, and lamb survival, are traits that can be improved very quickly, just to mention a few. Of course, wool quality and productivity traits as well. My observation is the information that AWI does carry on the above traits is mostly out of date by years and often incorrect, especially relating to non-mulesing traits.

Market intelligence. AWI says it is positioned to supply market signals to growers, but only when it suits the current board’s ideology. The AWI chairman said “I needed to move the heat from the animal welfare conversation.” This was a quote from an interview with Mr Laurie in the Australian Superfine Wool Growers Association’s 2023-2024 annual and subsequently highlighted in the ‘AWI withholds report on mulesed wool sentiments from growers’ story in Sheep Central 23.11.2023 that discussed an AWI survey in June 2023 canvassing the views of 198 wholesale and retail wool users in 27 countries. AWI withheld significant market intelligence from growers. Demand then falls, and AWI want more wool tax?

Marketing. The main reason why AWI’s marketing is ineffective in shifting the EMI in a positive direction is confusion. AWI is stuck in the 1970’s with Woolmark and generic wool promotion.

But consumers in the 2020’s have moved on, sorry… No one wants wool. It is considered heavy, hot, prickly etc etc. Savvy consumers want Merino. They know it is light, soft, wicks sweat etc etc. If AWI is to be effective it must think for today and the future.

For example, my birthday gift jumpers this year; “100% TRACEABLE MERINO”. High quality, good price points, non-mulesed of course. It is wool, but that is not the selling point anymore. It is Merino and has a positive back story about the people, animals and environment.

If AWI was to be effective in building demand, it would be promoting Australian Merino.

Internally, AWI has not fought to retain the quality crossbreds or other breeds under 30 micron. “Let the market decide” is what it has said. So, composites are increasing wool production now for high micron, low value fibre, but that will decline gradually as more breeders move to non-wool breeds.

Another AWI generic marketing failure has been taking on ‘Big Oil’ and chemical companies who produce synthetics. When will we see a return for that experiment? A noble campaign, but too far away from selling to that savvy consumer. Many of those consumers like blends anyway.

AWI’s ‘internal marketing’ is; however, substantial: Ewe competitions, wether competitions, sheep shows and field days are well supported, financially and often with drinks and BBQs. Stud breeders and breed societies should be funding these events.

Again, the cutting edge technology of genomics and genetic breeding values are rarely mentioned. Despite this so-called ‘consultation’, wool production and the EMI are down.

AWI’s performance over the past 10 years makes it hard to justify maintaining the wool tax at current levels. There is little evidence to back an increased wool tax. More money, spent with the same ideology and strategy, will result in a similar outcome.

Growers are changing their business constantly to cope with the times. We have to do more with less. Why should AWI not do the same?

Growers should demand AWI reassess its role and effectiveness in serving the industry. AWI must deliver growth and prosperity for growers, not be another reason for decline.

• With his wife Cheryl and family, Martin Oppenheimer manages 12,000 Merinos producing wool and lambs, plus 500 Angus breeders, at Walcha in the New England region.