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Can we process more of our wool here?

THERE has been a lot of talk around the yards about bringing more wool manufacturing back to Australia and being less reliant on Chinese imports.

The catalyst for these conversations has mostly been the influence of the COVID-19 pandemic, which has highlighted our reliance on this particular market – but it’s not that simple.

Can we process more of our wool here – well we have the capacity to, but is it viable?
So, let’s put that all in perspective, and ask those in the know.

According to Australian Wool Innovations (AWI), the Australian Wool Production Forecasting Committee’s fourth forecast of shorn wool production in 2020/21 is 290 mkg greasy. This is a 2.1 per cent increase on the 284 mkg estimate for 2019/20, as key wool growing regions experience favourable seasonal conditions.
The committee’s first forecast for 2021/22 is for shorn wool production to be 305 mkg greasy, an increase of 5.1 per cent compared with the current season. The current favourable seasonal conditions for wool production are expected to extend into the new season, boosting average cut per head. However, low sheep numbers will continue to limit shorn wool production in the short term.

Committee chairman, Russell Pattinson noted that “on the back of good seasonal conditions, wool producers intend to re-build their ewe numbers in many key wool producing regions by retaining more replacement and older ewes than normal”.

AWI is also exploring the options of early-stage processing in Australia. AWI is considering a cost feasibility review which will be run by an external panel. This is in the initial planning stages, and we will have a better update of this in the next couple of months.

China is a very unique partner from a manufacturing point of view and a consumption point of view. Not only does China buy 87 per cent of the Australian wool clip, but from a consumption point of view they are now consuming half of that domestically – and the other half was exported as clothing to the US, UK, and Europe.

When developing our most recent strategic plan, AWI undertook an extensive review of our Emerging Markets strategy following the successes that were enjoyed in markets like Vietnam.

Less than two per cent of Australian wool is processed locally.
Victorian Wool Processors (VWP) invested in a new facility at Laverton North, Geelong, in 2002, into a purpose-built warehouse to suit their expanding business.

David Richie of VWP said that “there are three existing early-stage wool processing companies left in Australia. All are family owned - the multinationals and public companies have closed.

“Wool processing plants require high levels of capital and as wool growers are aware, the industry has high variable levels of demand. These are not ideal environments for public listed companies to invest. You need companies that have a long affiliation with wool and who are prepared to and have the financial resources to ride out the lows to invest. “Since the early 1990’s there has been no investment in new plants other than by the three plants that are currently operating. Any government assistance to expand wool processing in Australia cannot erode the competitive position of the existing plants.

“There is capacity in the existing early-stage plants to increase processing in Australia without the need for further investment.

“Investment in the next stage may be possible.

“The three existing companies will invest when they can see a return.

“With declining wool production, there is still excess production capacity worldwide, which makes additional investment hard but not impossible to justify.

“Critical Australian quarantine laws prevent or hinder the importation of cheap second-hand equipment, and new equipment is expensive.

“Regional processing plants have been shown to be almost always unprofitable - plants need to be near a major port.

“My position is that governments need to be careful in this space - if private investors are not investing there is probably a good reason. It is not the position of wool growers to take control of the manufacturing process. They should concentrate on their on-farm activities and improve the marketing of wool. The supply chain will sort out its issues.”

Toorallie is a sixth-generation Australian company, founded in the Monaro District of New South Wales at Bombala. This business has experienced the highs of great prosperity but also the lows associated with uneconomical manufacturing and debt burden – much like the wool production industry itself.

Today, directors Simon and Steve Smith carry on the legacy with the Toorallie brand synonymous with high quality merino knitwear and clothing.

I caught up with Simon Smith to get a better understanding of the process of manufacturing Australian merino and today’s customer.

Simon agrees that “it’s very complicated, ideals and emotions are often a long way from the reality.
“Toorallie’s been manufacturing offshore for over 15 years.

“We use six or seven factories, each of which has unique machinery and skills to accommodate our different product lines, including knitwear across all gauges, tees, fleece, socks, denim, linen, and of course the yarn mill to make all the raw materials.

“Once you consider our product diversity and that knitwear only makes up about half of our sales mix, it becomes easier to understand why making our product on-shore is next to impossible.

“Toorallie has a fleece-to-hanger supply chain where we control the raw materials to ensure quality and provenance. The greasy wool is grown at Pooginook Station in NSW and then scoured and spun in China, as Australia hasn’t got the facilities for vertical wool processing that can not only scour greasy wool but also spin and dye the wool into finished yarn.

“We are proud of our story and hope to talk more about this into the future as we aim to differentiate Toorallie from generic brands. We are driven by ‘quality first’.

“Our key challenge for the future is onboarding an emerging customer who lives a different life and gathers information differently compared to our established customer … a learning curve the brand needs to master.

“We are aware of these changes and have expanded our fleece-to-hanger supply chain to capture a wider selection of Toorallie products. Our most established customer demographic is a mature well-educated individual whom we believe has been well aware of the benefits of natural fibres for many decades.

“The younger emerging customer who grew up in an era that ushered in a lot of synthetic innovations is now showing strong interest in natural, more sustainable choices.

Toorallie concentrates its business here in Australia and New Zealand. Your local supplier of Toorallie’s Knitwear and Merino Denim is ‘Tops ‘n’ Tails’, on Brown Street Hamilton.

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