Raise wool prices and lower costs if you want to boost Merino numbers

Vernon Graham - 28 Oct 2019, noon

BETTER PLANNING: Noel Henderson says Australian Wool Innovation needs to have a long-term strategic plan for improved marketing and research outcomes.

Noel Henderson says the current Australian Wool Innovation board doesn't want change and a renewal is needed.

The Victorian stud breeder and large-scale producer of superfine and ultrafine wool wool at Avington Merinos, Sidonia, is one of eight candidates seeking to fill three vacancies on the AWI board on November 22.

Mr Henderson is unhappy the AWI Board Nomination Committee only officially endorsed three of the eight candidates and two of them were long-serving current directors seeking re-election.

That suggested the board didn't want change and as a result would continue to get negative coverage in the media, he said.

Mr Henderson said Merino numbers were shrinking well before the present drought as producers left the industry in favour of cropping and sheepmeat production, lured away in part because many younger people weren't interested in wool.

We sent 10 questions to all the AWI candidates to give shareholder voters an insight into their priorities if elected to the AWI board.

Here are Mr Henderson's answers.

Question: If elected what would be your major priorities as a director of AWI?

Answer: My major priorities would be:

- To receive a detailed induction to fully understand AWI and how it has been operating

- To be briefed on the budget and how this is tracking given the reduced price for wool in the last 6 months, the impact of the drought in NSW and the reduced supply of wool

- To be briefed on the Strategic Plan and its implementation

- To challenge the existing board culture to enable a process of change to be implemented to enable an increase in compliance, performance, innovation and communication

Q: Do you think AWI has now got the balance right between marketing and research?

A: The current balance in terms of budget is 60 per cent marketing and 40pc R&D.

The feedback I hear from wool growers is that there should be more focus on R&D. To properly assess this there needs to be a link of risk to value with both marketing and R&D activities so there are measurable outcomes on which to base discussion and decision making.

Q: What do you think should be AWI's main research targets?

A: AWI now has an extensive range of R&D projects as set out in the Strategic Plan.

But I think the main targets should be:

- Planning for and managing the impact of climate change and its effects on sheep and wool production, both short and long term.

- Sheep health and welfare - increasing wool production with a focus on better health and welfare management of sheep.

- Genetics - continuing genetic development and improving use with growers.

- Technology and digital awareness - programs to help wool growers to use technical applications to improve management of sheep and wool production and to reduce wool growers and industry costs.

Q: How do you rate the AWI's current promotion and marketing strategy and what, if anything, would you do differently?

A: It is difficult to rate the current promotion and marketing strategy as there is very little known about it and no real method of measurement (60pc of the budget and yet the smallest section of the Strategic Plan).

A lot of marketing activity happens overseas and wool growers don't connect with this.

I would like to see detailed reporting on investment decisions and outcomes plus transparency and communication to all growers on all projects and activities.

Q: Do you think AWI is now transparent enough with its levy payers?

A: If by now you mean since the Independent Review in 2018, my perception is that not a lot has changed or improved yet.

LONG DECLINE: Noel Henderson says high wool prices and lower costs of production are the key to rebuilding Merino numbers.

Q: The Merino flock has declined dramatically in size (thanks, in large part, to drought). What should AWI be doing to rebuild it?

A: The Merino flock has declined from 170 million to now less than 70 million over the past 30 years.

Most of this decline is not due to drought but to a range of circumstances that include increased cropping in previously grazing areas, increase in sheepmeat demand and value, generational change that has seen less young people interested in wool production, decline in infrastructure and cost of replacement (shearing shed and yards).

AWI does have some very good initiatives to arrest the decline that include: a standard low-cost design for new shearing sheds, developing new markets for wool that will lead to increased demand and price, education opportunities for growers to improve their skills in sheep and wool management, as well sheep health and welfare, and lower costs of production.

But the real solution is to get the cost of production down and the price of wool up so that the wool industry is seen as an attractive investment for both the existing growers and potential new farmers.

Q: How important do you think it is to end surgical mulesing in the industry?

A: Social expectations have changed with new generations. The Australian sheep and wool industry has been debating mulesing for 20 years and still there is no standard.

We need a national standard to deal with mulesing while the research continues to find a vaccine for the blowfly that attacks sheep or other acceptable methods of fly control.

The Italian market for wool now wants it to be from unmulesed sheep. In China there are mills that only process unmulesed wool. Unmulesed wool sells for a premium, so the market is very clearly influencing the debate and outcome.

Q: AWI is often portrayed negatively in the media. What do you think needs to happen to change that or is the company the victim of the "usual suspects" out to stir up trouble?

A: AWI is not a victim but has allowed the negative media to develop by actions and statements of the former chairman. This has damaged the reputation and image of the wool industry.

The recent process for the nomination of directors and the outcome of four nominations for three positions (two of which are existing long-serving directors) shows that the AWI board does not want change and will continue to get negative press.

The wool industry has a strong history and a great story to tell and is a major contributor to the Australian economy. AWI needs professional guidance in dealing with the press.

Q: Does the Australian wool industry's heavy dependence on the Chinese market worry you?

A: China is an important market for Australian wool. But so is Europe and other parts of Asia. China has invested heavily in the past 25 years to build a modern large processing capability.

China buys about 80 per cent of the Australian wool clip. But not all this wool is processed through to end product stage.

Some of the first-stage of processing of the wool then goes to the European market for manufacturing into garments. The Australian wool industry has developed strong relationships with the Chinese market. The only thing that worries me is the interference with our trade by global factors.

Q: Any other comments?

A: During the nomination process for a director of AWI I became aware that less than 50pc of woolgrowers are shareholders. This needs to change to ensure all growers are able to have a say in how AWI functions and the future of the wool industry.

AWI needs a long-term Strategic Plan (not a two-year plan as has been prepared in the past). This would enable marketing and R&D to be planned with all stakeholders and potential partners and collaborators. This plan needs to include the actions to arrest the decline in Merino sheep numbers and wool production to ensure long-term viability for the industry.