AN independent analysis of Australian Wool Innovation's (AWI) $3.3 million investment in genetics and genomics from 2010 and 2013 has found the MERINOSELECT service could now operate on a user-pays basis.
Auditors BDA Group found AWI's genetic investments were dominated by the Sheep CRC Information Nucleus Flock (INF) at 48 per cent, and the operation and improvement of MERINOSELECT (46pc).
BDA reported AWI investment into these programs and other minor investments such as support for the Australian Merino Sire Evaluation Association (4pc of genetics related spending), has generated benefits to Australian woolgrowers of $1.5 million in present value terms. This represents a loss to Australian woolgrowers on the funds invested by AWI with $0.45 returned for every $1.00 invested.
However, AWI general manager of research Dr Paul Swan said levy-funded research and development (R&D) corporations, such as AWI, existed under a market failure justification - that is to say, to do the R&D private enterprise has not done.
Dr Swan said a key conclusion of the BDA Group analysis involved this concept of market failure - the conclusion that in a real sense, the MERINOSELECT service AWI and Meat and Livestock Australia (MLA) established more 10 years ago could now operate on a user-pays basis.
"This is both a very significant conclusion and a substantial achievement, and something both AWI and MLA, and the wider industry we serve, should be justifiably proud of," Dr Swan said.
The BDA report states the main reasons for the loss include the funding of the INF, for technologies essentially non-commercial at the time and potentially remaining so.
While the return to Australian woolgrowers from the overall investment has been negative, MERINOSELECT does generate value for participating woolgrowers.
The MERINOSELECT operation was assessed to be profitable, delivering some $325,000 a year in benefits to participating members in excess of MERINOSELECT operating costs (which were $551,000 in 2012-13 and some $322,950 recovered through member charges).
Additional gains are also realised by commercial woolgrowers who source rams from participating MERINOSELECT stud breeders (around $247,000 a year).
The key challenge BDA Group noted in relation to MERINOSELECT's potentially commercial operation was the value of the benefits gained from increased genetic gain in hard-to-measure traits were not necessarily reflected in increased ram prices.
A second issue BDA raised was any future investment by AWI in genetics and genomics needed to consider different options for either increasing the rate of genetic progress, or reducing the costs associated with benchmarking an animal's performance in studs, across all breeding approaches.
While the report challenged the effective return on investment in the area of genetics and genomics, Dr Swan said AWI remains committed to supporting investment in this area for the benefits of growers.
More information available at www.wool.com.