Australia’s sheep numbers are forecast to drop by 0.9% to 74.4 million and greasy wool production is forecast to be 345 million kilograms (-1.4%).
There are some ifs and buts. Australia’s highly variable exchange rate and climate will have critical impacts on lamb and wool production and price volatility.
AWI has released its three-year strategic plan 2013-14 to 2015-16 for Australian wool. The main focus is aimed at increasing international demand, markets access, on-farm productivity and environmental sustainability.
AWI’s budgeted expenditure for 2013-14 is A$87,092 million. Revenue is A$72,091m, made up of wool levies $48,492m, Government $10m, Woolmark $8,294m, investments and other $3305m, leaving a forecast deficit of $15m.
To gain industry support and unity from sheep farmers, the service industry, woollen processors, manufacturers and retailers AWI says a critical part of their plan will be delivering an effective communication and education programme to their levy payers and partners.
A significant change (compared with the 2010-13 plan) is how expenditure has been allocated to on and off-farm activities. Marketing has the biggest share at 60% (+10%), followed by on-farm research and extension, 25% (-5%) and off-farm research and development 15% (-5%).
Priorities for on-farm expenditure will be targeted at parasite control (fly, lice and worms), animal health and welfare such as footrot and Johne’s disease. Managing predators and pests such as wild dogs, foxes and rabbits is also high on the list of priorities.
Another key target is to increase ewe reproductive performance. The flock of 42 million breeding ewes is seen as the engine room of Australia’s sheep meat and wool industries. They are also the main revenue drivers for farm profitability as well as the businesses servicing the livestock industry.
The aim is to double the present rate of genetic gain from 0.2% to 0.4% across the Australian sheep flock by 2017. A focus on reducing embryo mortality and increased lamb survival is aimed at increasing the number of lambs weaned from Merino ewes by 10%.
High on the list is improved feeding and feed utilisation, pastures and pasture management, as these are the drivers of wool quality and lamb production.
Investment in new and improved tools for nutrient management and chemical use efficiency are equally important to help farmers minimise costs and make informed management decisions.
Wool harvesting (shearing, wool-handling, classing and pressing) hasn’t been missed. The main challenge identified is that the wool harvesting workforce faces competition from other professions and trades.
Funding has been allocated for recruitment and training, including in-shed coaching to improve skill development and to foster professionalism.
Risk factor
China seen as a significant risk factor for Australian wool prices.
Investment in off-farm programmes is targeted at creating sustainable demand for Australian wool and providing technical support to woollen processors and manufacturers. With 75% of Australian wool exported to China, it is seen as a significant risk factor as China is no longer the world’s low-cost mass producer of woollen textile products.
To reduce risk AWI plans to facilitate setting up supply chains in low-cost countries such as Vietnam, Bangladesh, Belorussia and Ukraine. AWI also plans to invest in developing sustainable and ecological processes to minimise environmental risks from manufacturing, garment care, recycling and decomposition.
Marketing has the lions share – 60% (A$45.3m) of AWI’s expenditure for the next three-years will be spent building demand for Australian wool.
AWI says there are gaps in consumer and trade knowledge about the unique properties of Australian wool and what it has to offer as a textile fibre. Marketing programmes will be targeted at key markets in specific regions, such as the UK, Italy, France, US, Japan and China using a mix of advertorial style, digital and social media as well as traditional news media.
While China is seen as a high-risk area for the greasy wool market, there are significant opportunities for targeting Chinese consumers. There are an estimated 62 million Chinese travelling overseas for leisure.
AWI says Chinese consumers spent an estimated A$27 billion on personal luxury items in 2012. Of this only 40% was spent in China. Sixty per cent was spent overseas seeking authentic European luxury products. AWI sees this as a significant opportunity for luxury products made from Australian Merino wool.
Other promotional campaigns will be used to support AWI’s marketing initiatives such as Woolmark, Cool Wool, No Finer Feeling (a seasonal marketing campaign) and The HRH Campaign for wool.
AWI says there is a generational gap in people’s knowledge about Merino wool. It exists among consumers, higher education providers, retail floor staff, spinners and weavers. AWI’s unique position in the industry offers it the opportunity to provide knowledge, skills and technology to help pull wool through the supply chain as well as generate consumer demand.
Woollen clothing critical
Consumers pay about US$80 billion each year for woollen apparel purchases. That’s about the equivalent of US$195/kg. Yet only about US$3.5 billion (4%) filters back to sheep farmers globally and Australian farmers get only about 70% or US$2.5 billion.
AWI says the evolving demographics of consumer clothing expenditure are critical to the future of wool. Wool is a rare natural fibre that has to compete in a sea of mostly cheaper man-made fibres.
To gain a sustainable increase in greasy wool prices, the challenge for AWI is to increase the prices consumers are willing to pay for woollen clothing.
Long-term demographic research done for AWI indicates that the top two tiers of global consumer expenditure on clothing and footwear accounts for 50% of all investment annually. That’s despite representing only 8% of the global population (550 million wealthy people).
The affluent consumers are located in the OECD economies of US, Japan, Western Europe and China but market growth in expenditure is expected to average only 1%. The largest growth is expected from emerging consumer markets in Brazil, Russia, India and China (known as the BRIC nations) where the consumer base is more widely based and expenditure is expected to grow by 5-6% a year.
Australia supplies about 25% of the world’s wool supply, supplying more than half the world’s apparel type wool and 90% of fine apparel wool.
Sheep-farming enterprises are stable at an average of one ewe/lamb with purebred Merino flocks making up 75% of the sheep population. There is a trend towards Merino-derived crossbred sheep where the focus is on lamb production systems targeting higher lamb growth rates and weaning weights.
AWI says Australia’s dominance of supplying the world’s apparel wool will remain unchallenged in the next three years.
Wool production is forecast to remain stable at 345 million kilograms greasy and is not expected to exceed 350 million kilograms by 2016-17 due to the competing demand for sheepmeat.
Key points:
- Australia supplies about 25% of the world’s wool supply, but produces more than half the world’s apparel wool and 90% of fine apparel wool
- Australian Wool Innovation plans to spend more than it earns
- Strategic plan forecasts A$87 million spend leading to a A$15 million deficit for 2013-14
- AWI says a critical part of getting levy payers to support their strategic plan will be effective communication and education
- 42 million breeding ewes are the engine room for driving profitability of Australia’s sheep meat and wool industries
- Genetic gain in Australia’s sheep flock expected to double by 2017
- China market high risk for greasy wool prices, but 62 million Chinese travellers seen as significant opportunity for luxury products made from Australian wool
- Consumers spend US$80 billion/year on clothing, but farmers get only 4% of what consumers pay.
