Latest official forecasts of another 9.2 per cent cut in the national wool clip has forced Australian Wool Innovation to dig an extra $7.5 million out of its reserves to support this year's budget.
The AWI board has agreed to the request from its CEO, Stuart McCullough, for the injection of new cash as drought and lower-than-expected wool prices have slashed the company's levy income from growers.
Mr McCullough told shareholders at the AWI annual general meeting in Sydney the company had been forced to tighten its belt across all its programs.
The company had shed 20 staff in the past year and would lose another 20 in the coming 12 months which would reduce its workforce to 155.
He said the company had been banking on an Eastern Market Indicator of $18 (rather than $15 to $16) in 2019-20 while hoped for rains last winter hadn't happened.
The latest official wool production forecast puts the national clip at 272 million kilograms this year compared with 300 million kg last year.
Production in drought-hit NSW is tipped to fall 13.7pc to 85.5 million kg which has helped blow a huge hole in AWI revenue.
The AWI had budgeted on spending $95.3 million in 2019-20 but that had been pruned to $91.4 million including $29 million from reserves.
AWI was now looking at forecast budgets of $75.7 million and $65.3 million in the next two years which would require dipping into reserves again by $15 million and $8 million respectively.
Levy income this year was now predicted at $38 million compared with $68.1 million last year.
Mr McCullough said Australian wool was being sold into a group of major world economies with a combined gross domestic product of $52 trillion.
However, consumer confidence was low across the board and cutting interest rates to stimulate growth was having little effect.
One potential bright spot was the United States, the largest economy in the world, where wool consumption (an average 300 gram) was only a third of that in Europe and Great Britain (one kilogram).
"The US is a bit of a pot hole for us in terms of consumption," he said.
With roughly equal population to UK and Europe and with the same affluence and same climate, the US should logically be consuming the same amount of wool, he said.
"There is something there we haven't exactly been able to figure out."
Mr McCullough said AWI had launched programs to educate US consumers on the care of woollen garments and softness and handle.
He said the athleisure market segment offered promise for growth in the US.
The story AWI cutting its budget cloth to fit dive in revenue first appeared on Farm Online.