WoolProducers Calls For Urgent Action to Tackle the Wool Industry’s Profitability Crisis

WoolProducers, as the sole national voice representing the interests all of Australian woolgrowers - not just a section of producers - have been advocating in a number of forums that currently profitability is the critical issue facing our industry. We can no longer ignore the stark reality presented by the numbers.

While the cropping sector has seen a commendable 1.6% productivity gain per annum over the last four decades, our sheep industry, encompassing both wool and meat, has limped along with a mere 0.5% per annum increase during the same period, and let's be frank, the wool component is likely the anchor dragging that figure down.

This isn't just a discussion about statistics; it's about the very livelihoods of the men and women who dedicate themselves to producing our iconic fibre. Reports like the Agrista study, "Why Stay in Wool?", paint a concerning picture of a significant divide. While the top 20% of growers are finding profitability, the average grower is struggling to achieve adequate returns for their hard work and investment. The fundamental question we must confront is: how do we bridge this profitability gap and ensure we retain our crucial, bread-and-butter growers?

The consequences of inaction are tangible and worrying. We risk a decline in economies of scale as the national clip shrinks. Producers in many pastoral regions are already feeling the squeeze, their isolation impacting flock liquidity and, ultimately, their economic viability and practical ability to remain in the industry. This is a bellwether for what could become a wider trend if we don't act decisively.

To address this crisis, we must dissect the key factors eroding profitability. Let's start with wool prices. We are all too aware that these are heavily influenced by macroeconomic trends, forces largely beyond our control. The current price levels are certainly not helping, but the extreme volatility we've experienced is equally damaging, creating crippling cash-flow nightmares for farmers. There's talk of a "sweet spot" for the EMI around 1700c/kg in the last decade. We have a significant distance to cover to reach that level again. Furthermore, with the escalating cost of production, the "sweet spot" required for growers to significantly increase wool production is likely now north of 2000c/kg.

What we must prioritise moving forward are sustainable and consistent profit margins for our growers. No one will be enticed to remain in an industry where good profits are a once-in-a-decade occurrence.

Then there's the elephant in the room: the cost of production. Independent analysis has highlighted the substantial surge in labour costs over the past 4-5 years – shearing, contractors, general farm hands. Shearing alone can account for upwards of 25% of the fleece value, a devastating figure, particularly for those producing broader wools. And the financial burden doesn't end at the farm gate. Pre- and post-sale handling fees are becoming increasingly onerous, especially when prices are depressed.

Adding to this financial strain are the growing expectations surrounding sustainability schemes like RWS, AWSS, and ZQ. Often, the time, effort, and cost invested by growers to participate in these schemes don't translate into tangible premiums in the marketplace. Are we truly seeing a return on this investment? Compounding this is the emergence of "soft regulation," where banks are increasingly asking about carbon footprints and mulesing status, adding another layer of potential restriction and expense. Let's not forget the ever-increasing and often unavoidable input costs like EIDs, pain relief, managing chemical resistance, and parasite control – all chipping away at profitability when we are not seeing an increase in returns.

So, where do we go from here? We need to laser-focus on potential solutions that directly address profitability. Recognising that we have limited influence over the price paid for wool due to its exposure to global factors, our primary focus must be on lowering the cost of production.

Firstly, we must aggressively invest in innovations that improve labour efficiency. This is paramount in tackling one of the most significant drivers of our escalating costs. Secondly, we need to encourage widespread adoption of farm business benchmarking programs and data sharing. Empowering growers with knowledge, and crucially, assisting them with adoption through effective extension services, is key to informed decision-making and the uptake of new technologies.

We also need to critically examine and streamline industry service provision cost structures. Every dollar saved per kilogram makes a tangible difference to a grower's bottom line.

Developing strategies to better mitigate price volatility is another crucial area. Can we explore alternative marketing mechanisms or risk management tools?

We must actively promote the merino as a dual-purpose animal. Relying solely on wool in today's climate is a precarious position for many. Highlighting the value of meat alongside wool offers a more resilient and attractive proposition for merino producers. A focus on the dual-purpose merino will also help retain more merino ewes in the national flock, facilitating quicker clip growth when market conditions improve.

Beyond these primary concerns, we face secondary challenges that impact profitability. The inherent trade risk and marketing of our product, often positioned as a discretionary spend, exacerbates price volatility, even though this positioning often bears little relation to the price growers receive. While high-end products are fantastic for public relations, we need to broaden wool's appeal and integrate it into mainstream brands and products, even if it means exploring blends with other fibres to increase volume demand. The ongoing concentration of exports to a single market presents a significant risk to any industry, of which the wool industry is no exception.

Finally, we must address the issue of industry advocacy. The lack of a unified voice weakens our ability to drive meaningful change. We need to reposition our advocacy structures and find a way to align and coordinate our efforts. Continuing down the current path of allowing fragmented and self-serving opinions to overshadow sound and justified policies is no longer a viable option. It has, and will continue to, actively hinders industry progress and innovation – something that can no longer be tolerated.

The profitability crisis is the most significant threat to the future of the Australian wool industry, both on-farm and post-farm gate. Addressing the cost of production, mitigating price volatility, and strategically marketing our product are paramount. But equally important is fostering innovation, empowering our growers with knowledge that translates into practical adoption, and establishing a unified and effective industry voice. The time for action is now. Let's work together to ensure a profitable and sustainable future for Australian wool.

WoolProducers Australia