AUSTRALIAN Wool Innovation’s 2019-22 strategic plan has won the support of the nation’s peak grower body WoolProducers Australia, but with some key reservations.
WPA president Ed Storey today urged AWI to stop ‘crying poor’ as a means to justify a lifting of its grower levy from 1.5 percent back to 2pc, after releasing its big-spending three-year strategic plan this week.
Mr Storey also today renewed WPA’s call for AWI to align its strategic planning process with Meat & Livestock Australia.
He also re-opened the debate on whether AWI shareholders should be given a say on whether to continue AWI’s current 60:40 ratio for its marketing:research and development programs spending split.
Mr Storey said WPA welcomed the five pillars in the 2019-2022 AWI strategic plan released on Monday, noting the “robust” spending levels in the plan for the 2019-20 financial year of $46.8 million on marketing; $16.29m on sheep productions, science and technology; $10.5 million for processing innovation and education extension; $5.4 million on traceability, and; $5.1 million on consultation. This totalled $95.3 million for 2019-20, falling to $88.9m in 2020-21 and to $81.8m in 2021-22.
“There has been some commentary recently on how AWI had little money and not much money to do stuff with.
“The presentation of this strategic plan clearly articulates that is not the case,” Mr Storey said.
“The budget spend over the next 12 months is just over $95 million, which is the second largest budget spend in the company’s history.
“They have plenty of money to do good marketing and research and development programs, and we welcome that,” he said.
“We think they have got plenty of money at the moment.”
He recognised that the company was drawing down on reserves — $21.5 million in 2019-20 to leave reserves at a historically high level, estimated at $97.8 million – and levy income over the next three years would be driven by wool price and sale volumes.
“The quantity is going to fall off and it is appropriate to use reserves during such a period.”
Mr Storey said AWI representatives at industry meetings and functions had repeatedly stated that “no, we’ve got no money.”
“They need to stop doing that and refocus on the $95 million they are going to spend next year and make sure it is spent well.
“What we want is for AWI to remain focussed on the job they do, not spend the next 2.5 years just going around saying how poor they are, which is in effect lobbying for 2pc at the next WoolPoll,” he said.
“That’s not appropriate for an RDC.”
AWI chief executive officer Stuart McCullough has claimed that the company “has consulted widely with wool growers and their representatives to ensure industry views and priorities were incorporated into the final plan.”
Mr Storey said the strategic plan consultation has been “a vast improvement,” but the draft strategic plan could have been published online earlier.
“But we think there are other areas that will formalise and improve the consultation even further next time,” he said.
“The timelines can be improved and the opportunities for input, but groups did have lots of opportunity to view the document and have input.
“Putting the draft is one area in which we think they can improve; the final iteration was up (on the AWI website) too late, but the strategy part of the plan was up in time to have input.”
Mr Storey also noted that the not-for-profit company’s marketing spend in 2019-20 will be almost three times as its sheep production budget, and almost 10 times its allocation for traceability programs.
“There is no doubt that some of the marketing programs over the last 10 years have played a very constructive role in the industry, it’s pretty hard to argue against.
“We continue to need those programs to be efficient; to be leveraged with brands and to work with industry,” he said.
“We will always question big-spending broad generic programs; in the odd occasion they may have a role to play.
“We think AWI have done a better job in marketing in recent years and improved the leverage and value gained from marketing.”
Mr Storey said the 60:40 spending split was a decision of the AWI board several years ago and WPA had not formal policy on whether it should be changed, but he said supply was a critical issue in the industry now.
“There is no doubt wool growers will have to over the next year or two think about, form a view and have an opinion about that is the way they want to keep going.
“WoolProducers Australia has long argued that shareholders should have the opportunity to have a say the 60:40 spend ratio,” he said.
“It being a decision of the board, it can be changed at any time by the board, though it is unlikely they are going to change during a strategic plan period, but the wool market and production systems are dynamic.
“Growers have to apply their minds to this topic and really decided if that’s the ratio they want into the future and if they don’t, they need to start speaking out.”
Mr Storey also questioned AWI’s persistence with a three-year strategic plan cycle. He said the recent Ernst&Young AWI review of performance governance review recommended that AWI go to a five-year strategic plan, though not specifically aligning with MLA’s cycle.
“We support that, but it is absolutely imperative that five years line up that those five years line up with MLA’s five years for their strategic plan.
“Such that the two bodies work together in the development of their strategic plans and avoid duplication and maximise the efficient spending of our levies,” he said.
“We’ve raised it once and we will be raising that issue with them more formally shortly because we think it is actually vital.”
WPA will also be talking to the new Minister for Agriculture Bridget McKenzie about how such a five-year strategic plan cycle alignment could be incorporated in the AWI’s next Statutory Funding Agreement with the Federal Government, he said.