An open letter to all Australian woolgrowers
Fellow woolgrower,
As you are well aware, woolgrowers in Australia are currently in the midst of a profitability crisis. Ongoing depressed wool prices and increasing production costs are squeezing us from both sides. It’s painful to see increasing occurrences of merino flock dispersals, as many producers choose to leave our industry in favour of “more profitable” enterprises.
With the Eastern Market Indicator (EMI) in the second half of 2024 largely unchanged from where it was a decade ago, coinciding with AWI heavily focusing on marketing as a route to increasing woolgrowers’ incomes during the same period; WoolProducers Australia commissioned Episode 3 to undertake work to evaluate the impact of levy spend on marketing activities on the price of Australian wool to assist with discussions in the lead up to AWI’s three-year strategic planning cycle. The work sought:
The assessment of the impact of AWI marketing spend on the Eastern Market Indicator (EMI)
To compare the price of wool to other fibres, and to other commodities/lead economic indicators
The development of an economic regression model that outlines the key drivers of Australian wool pricing. The EMI was used as a benchmark price indicator for the purpose of the report.
Episode 3 found that that the key factors that drive fluctuations of the EMI are; Exchange rate: AUD:CNY, Global Raw Materials Index, Global Energy Index, Australian Wool Production volume, and a Global Economic Growth Indicator.
None of the models tested by Episode 3 showed that AWI wool marketing expenditure had a meaningful impact on the EMI.
From this work, and looking at current wool prices, it appears that our current marketing efforts have little to no impact on the price that we receive for our wool. Over the past 10 years we have spent over half a billion dollars of our levies on wool marketing, yet the EMI has remained largely unchanged. With WoolPoll now past us, and the AWI 3-year strategic planning cycle underway, it’s an opportune time for you to have a say on how your levies are spent.
The other side of the profitability equation is cost of production. We do have control over that, so why aren’t we investing more to make woolgrowers more efficient?
If you would like to read more into the Episode 3 work, a copy of the report for you to review can be found here on the WoolProducers website. Consideration of this report is just the first step in an essential series of discussions to determine how we allocate our levies and marketing strategies moving forward. It may be the case that AWI needs to undertake a more thorough analysis of return on investment (to growers) when determining where levies are spent, and that can only be measured in terms of improved grower profitability.
In order to ensure the profitability and future prosperity of our industry, I strongly encourage you to review this report and consider where we need to invest our levies and provide input to the AWI three-year strategic planning process that is currently underway Future generations of woolgrowers are relying on us to make the right decisions at this time. In this regard you should contact your respective representative body to make your views known in advance of the AWI consultation meetings.
Yours Sincerely,
Steve Harrison
President - WoolProducers Australia