Australian wool in good position says AWI

29 Sep, 2012 02:00 AM
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Australian Wool Innovation market intelligence and reporting group manager Paul Swan and chief executive officer Stuart McCullough at the AWI meeting in Merredin.
Australian Wool Innovation market intelligence and reporting group manager Paul Swan and chief executive officer Stuart McCullough at the AWI meeting in Merredin.

AUSTRALIAN wool growers are poised to benefit from emerging affluence in China.

This was the message from the Australian Wool Innovation (AWI) roadshow meetings held throughout WA last week to coincide with the opening of the 2012 WoolPoll vote.

Continued growth in China and an on-going fall in global wool production were expected to lead to improved wool prices according to AWI market intelligence and reporting group manager Paul Swan.

Mr Swan said since 2001, when the stockpile was depleted, there had been a slow upward trend of price due to the emergence of the Chinese market.

"China has transformed the industry," he said.

"And it will continue to do so over the forecast period of the next three years."

Mr Swan was hopeful the prices would improve over the next five years which he put down to tight supply and the decline of global production.

"Australia is the only country that is increasing its wool production," Mr Swan said.

"This, coupled with our total dominance of apparel wool, puts us in a very good position."

While traditional markets remain an integral part of the Australian wool industry, Mr Swan said it was the emerging markets that would be the cream for Australian producers.

"AWI recognises and is taking advantage of the opportunities in Vietnam," he said.

"We are currently building the skills and capacity to process wool as the wage costs are significantly lower there than in China.

"We also recognise Belarus and the Ukraine as becoming more and more important as they are right on the edge of Europe."

AWI chief executive officer Stuart McCullough said the company would continue to focus on its key marketing strategies, No Finer Feeling, the Campaign for Wool and the Gold Woolmark over the next three years but would be dedicating extra funds to the Gold Woolmark.

"The Gold Woolmark is dedicated to China, focusing on a luxury campaign," Mr McCullough said.

"This is where we think we are going to see growth, this is where there is emergence of affluence and this is where we will be committing the extra marketing money to.

"We are moving the needle in favour of marketing but we are doing it for a very good reason."

Mr Swan said they would also be focusing on the mother and baby market sector.

While there were currently big challenges with the commonly held belief wool was prickly and an allergen, he said AWI had been doing a lot of work in this space.

"We have been doing a lot of dermatology work and have found fine Merino wool does not cause an issue with prickle and is not an allergen," Mr Swan said.

"We also did a focus group and gave a number of Chinese mothers access to Merino baby products, and they loved it."

Mr Swan did not want to underestimate the importance of the baby and children's wear market.

He said in Australia's key markets, the average child had a colossal amount of money spent on clothing.

The meetings also outlined the AWI plans for the next three-year period in regards to research and development.

As has been well publicised, AWI was looking to swing the funding ratio in favour of marketing by 10 per cent.

While some growers have expressed concern over funds being taken from both on and off-farm research Mr McCullough made it clear the sector would not be missing out.

"Despite the swinging of the needle we will be increasing our spend on research and development because we will be drawing on the reserves," he said

"In dollar terms it will be increasing from $20.8 million to $22.5 million."

Mr McCullough said the on-farm research portfolio focused on flies, worms, genetics, dogs and shearing.

He said the AWI recognised shearing was a big issue for WA producers and it was a high priority of the board.

Mr McCullough said while the expenditure in the next period was aggressive, AWI was hoping to flatten the spending out and get some stability in the market.

"The wool industry is famous for these knee-jerk reactions," he said.

"Every time the prices falls there is calls for the ratio to be changed, one minute it is 100pc marketing and if that doesn't work its back to 100pc research and development.

"But we want to stabilise our spending and get a better outcome."

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