Time for positive changes on farm

By ROBIN CAMPBELL*

The McKinsey report on improving profitability for woolgrowers will create much discussion at the Wool Board annual meeting this month.

Seasoned observers of our wool industry insist that there is very little that is new in the $3 million report. However, transcending all that industry participants might think of this report, is the undeniable fact that it has created the industry's best opportunity to change since the 1972 Battelle report.

It is likely that the single most influential factor in farmers' endorsement of the report is the proposal that sees the Wool Board levy fall from 5 per cent to 1 per cent. If that is true (and nobody likes paying taxes), then it might be that growers know what they are against, but they may not be so certain about what they are for.

Sheep farmers are never totally agreed on where they should co-operate, and where they should compete with each other. Over recent years, they seem to have accepted that research and development, market access, generic promotion, and quality assurance have been matters best managed collectively. Producer boards have provided the necessary infrastructure.

The McKinsey report suggests that for wool, research and development should be the only significant co-operative activities. The logic is that if research and development is left to the private sector the search will always be for saleable cures so that profits can be realised. Farmers on the other hand are more interested in management solutions for which lifting of skills may be required but have little ongoing cost.

Generic promotion is dropped on the grounds that there is no discernible benefit to producers in returns.

Farmers need to consider that competing fibres are more convenient to buy, easier to use, and internationally enjoy greater consumer acceptance. McKinsey's idea of concentrating on one product (carpet) in two markets (Europe and US) is extremely risky. Without active support, will processors and manufacturers continue to choose wool?

Quality assurance has been a bigger issue than many producers realise. But if a towel falls into a bale of wool and the claim over contamination lands on an individual farmer this situation will change quickly.

China apart, market access for wool has been largely a non-issue.

The McKinsey report suggests that to maintain their financial position, sheep farmers will need to increase economic farm surpluses by 5 per cent a year. This is not an unreasonable suggestion. But it will be a difficult target. It means that in 10 years farms will have to deliver 162 per cent of present outcomes.

Even these few details of the report show that the wool industry is set to take on a whole new shape.

An initiative by Romney New Zealand has gained substantial support from farmers. This plan is based upon the premise that wool will not shake its commodity status until there is a network of committed purchasers, and there will not be any committed purchasers until sellers are prepared to commit to supply according to specification.

If this groundswell of farmer support could be merged with the technical developments, contacts, and infrastructure farmers have previously established through the Wool Board (to be vested in Strong Wools NZ), then farmers can be involved further along the value chain.

The Ovita biotechnology proposal predates the McKinsey report but was included among its proposals. It sets out the possibilities for the sheep industry to move beyond its traditional range of products, sharing in the exciting future that is promised for biological industries.

Let's hope that those who attend the Wool Board meeting in Dunedin this month do so with an eye to the exciting future that they can vote for, rather than the disappointing recent past they may wish to vote against.

Robin Campbell is a Southland stud sheep farmer, chairman of the Sheep Research Foundation and Agricultural Communicator of the Year.

Body1: The McKinsey report on improving profitability for woolgrowers will create much discussion at the Wool Board annual meeting this month.

Seasoned observers of our wool industry insist that there is very little that is new in the $3 million report. However, transcending all that industry participants might think of this report, is the undeniable fact that it has created the industry's best opportunity to change since the 1972 Battelle report.

It is likely that the single most influential factor in farmers' endorsement of the report is the proposal that sees the Wool Board levy fall from 5 per cent to 1 per cent. If that is true (and nobody likes paying taxes), then it might be that growers know what they are against, but they may not be so certain about what they are for.

Sheep farmers are never totally agreed on where they should co-operate, and where they should compete with each other. Over recent years, they seem to have accepted that research and development, market access, generic promotion, and quality assurance have been matters best managed collectively. Producer boards have provided the necessary infrastructure.

The McKinsey report suggests that for wool, research and development should be the only significant co-operative activities. The logic is that if research and development is left to the private sector the search will always be for saleable cures so that profits can be realised. Farmers on the other hand are more interested in management solutions for which lifting of skills may be required but have little ongoing cost.

Generic promotion is dropped on the grounds that there is no discernible benefit to producers in returns.

Farmers need to consider that competing fibres are more convenient to buy, easier to use, and internationally enjoy greater consumer acceptance. McKinsey's idea of concentrating on one product (carpet) in two markets (Europe and US) is extremely risky. Without active support, will processors and manufacturers continue to choose wool?

Quality assurance has been a bigger issue than many producers realise. But if a towel falls into a bale of wool and the claim over contamination lands on an individual farmer this situation will change quickly.

China apart, market access for wool has been largely a non-issue.

The McKinsey report suggests that to maintain their financial position, sheep farmers will need to increase economic farm surpluses by 5 per cent a year. This is not an unreasonable suggestion. But it will be a difficult target. It means that in 10 years farms will have to deliver 162 per cent of present outcomes.

Even these few details of the report show that the wool industry is set to take on a whole new shape.

An initiative by Romney New Zealand has gained substantial support from farmers. This plan is based upon the premise that wool will not shake its commodity status until there is a network of committed purchasers, and there will not be any committed purchasers until sellers are prepared to commit to supply according to specification.

If this groundswell of farmer support could be merged with the technical developments, contacts, and infrastructure farmers have previously established through the Wool Board (to be vested in Strong Wools NZ), then farmers can be involved further along the value chain.

The Ovita biotechnology proposal predates the McKinsey report but was included among its proposals. It sets out the possibilities for the sheep industry to move beyond its traditional range of products, sharing in the exciting future that is promised for biological industries.

Let's hope that those who attend the Wool Board meeting in Dunedin this month do so with an eye to the exciting future that they can vote for, rather than the disappointing recent past they may wish to vote against.

* Robin Campbell is a Southland stud sheep farmer, chairman of the Sheep Research Foundation and Agricultural Communicator of the Year.