WOOLGROWERS lost 55 cents for every dollar invested by Australian Wool Innovation (AWI) in genetics and genomics research between 2010-2013, a new report claims.
The AWI-commissioned report calculated that the organisation's $3.3 million investment over four years in programs like the Information Nucleus Flock (INF) and MerinoSelect delivered only $1.5 million return to the wool industry as a whole.
The report could mean that AWI severs any remaining funding links with pure genetics research and genetic services like MerinoSelect. It proposes that MerinoSelect could now operate as a “user-pays” services for the studs that choose to use it.
“BDA’s conclusion seems to be driven largely by its terms of reference”
AWI’s research general manager, Dr Paul Swan, said that AWI remains committed to “genetic improvement”, but only reaffirmed a commitment to the breeder-run Australian Merino Sire Evaluation Association.
The finding by the report’s independent author, the BDA Group, that AWI investment in pure genetic programs like the INF and MerinoSelect is essentially a waste of money, appears out of place in a world where genetic science has powered massive productivity improvements in industries like dairy, pork and chicken.
However, BDA’s conclusion seems to be driven largely by its terms of reference, which didn’t include forecasts of the future value of genetics and genomics programs to the wool industry.
Considerations of value were ringfenced into the period 2010-13, and only applied to direct commercial outcomes in those years.
For instance, the BDA report only assessed the costs of the INF program; the assumed benefits - measurement of hard-to-measure traits, and a basis for the development of genomics - fell outside the four-year study period.
“But MerinoSelect is profitable, if only while servicing relatively few”
Nearly half (48 per cent) of AWI’s investment in genetics programs from 2010-13 was made through the Information Nucleus Flock. AWI announced it would pull its funding from the INF in 2011 because it did not see a bridge between the INF program and commercial outcomes.
The Sheep CRC responded that the “bridge” would be new and improved Australian Sheep Breeding Values (ASBVs).
MerinoSelect received 46 per cent of AWI’s genetics investment over the study period.
The Australian Merino Sire Evaluation Association (AMSEA), strategic planning and NSW I&I’s Merino Bloodline Comparisons received the remaining funding.
In one sense, the report was largely a reflection on the wool industry’s low adoption of genetic technologies.
It noted that 237 flocks were members of MerinoSelect during 2012-13. Only the value gained by these flocks in this period was used to impute the program’s worth to AWI, and thus for the entire industry.
But MerinoSelect is profitable, if only while servicing relatively few, which prompted BDA to suggest that AWI no longer needs to fund it to counter “market failure” in the space.
“MerinoSelect can operate as a commercial entity with private benefits able to be appropriated by participants and the cost of providing the service effectively priced.”
“Investment options involving other breeding approaches should also be considered”
Dr Swan said the main issue for fully commercial operation of MerinoSelect is that “the value of the benefits gained from increased genetic gain in hard-to-measure traits are not necessarily reflected in increased ram prices – itself a form of market failure, but not necessarily a justification for ongoing AWI funding”.
BDA proposed that other approaches to genetic gain - performance recording, visual classing, elite wools - might be as effective as MerinoSelect, but without the costs to the wider industry.
“Given available evidence on the success of different approaches to breeding, it cannot be concluded that MerinoSelect is the most appropriate breeding approach for all stud breeders, only that some stud breeders may prefer it over other approaches and realise a benefit from participation.”
But BDA didn’t question the ability of MerinoSelect to drive genetic gain and profit.
“While the return to Australian woolgrowers from the investment (in MerinoSelect) has been negative, this does not imply that MerinoSelect does not generate value for participating wool growers,” the authors wrote.
“In fact, 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).”
“Further, additional gains are also realised by commercial woolgrowers who source rams from participating MerinoSelect stud breeders (around $247,000 a year).”
BDA concluded that any future investment by AWI in genetics and genomics needs 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 improving MerinoSelect might be a viable strategy, “investment options involving other breeding approaches should also be considered”. Read the full report Benefit Cost Analysis of AWI’s Genetics & Genomics Investment on www.wool.com .