Wool rides out the industry's tough times

WAL Merriman, joint owner of Merryville merino stud and chairman of Australian Wool Innovation, has a long-term view of his industry -- not surprisingly since he and his brother George are the family's fifth generation of fine-wool growers and their Merryville stud is the genetic base of Australia's fine-wool industry.

WAL Merriman, joint owner of Merryville merino stud and chairman of Australian Wool Innovation, has a long-term view of his industry -- not surprisingly since he and his brother George are the family's fifth generation of fine-wool growers and their Merryville stud is the genetic base of Australia's fine-wool industry.

Merriman has seen the good times and the bad and knows well that Australia will never again ride on the sheep's back. But he also knows the enduring strengths of the industry and the hidden ones that will emerge in response to carbon trading policies, environmental, fashion and health issues.

"These days you can't expand by buying more land, it's too dear," Mr Merriman said.

"Growth lies in increasing the demand, so what the industry needs more than anything right now is proper marketing.

"When I bought land, I was paying $450 to $550 an acre. At the top of the recent property boom, that same land would have cost $1500 an acre.

"After the global financial crisis it came back to about $1000 an acre, but it is hard enough to make a living off land you've paid $450 for, so there is some pain out there and it will stay unless growers boost demand for wool."

Wool was a renewable resource, he said.

"The industry is sustainable and advanced techniques have created new products like wash-and-wear wools, stretch wool for sportswear" and the use of shorter wool in weaving "which brings the price of garments down".

"The benefits are there, but awareness of them isn't," he said.

Merryville sells entirely into the export market: to the fine Italian clothiers and to Chinese mills that are often in joint ventures with Italian firms.

Woolgrowers pay an annual levy of 2 per cent to Australian Wool Promotion. The levy is reviewed each year.

Mr Merriman and Australian Wool Innovation have recently diverted much attention from simple promotion to damage limitation after the mulesing (shearing skin from the sheep's breech region) outcry.

But it has led to improved animal welfare and alternative methods to prevent flystrike. Australian wool is now offered as "non-mulesed" or "ceased mulesed".

Getting that message out and understood will continue to be a task for some time, as well as the industry's normal marketing programs.

"We also want people to know wool's benefits," Mr Merriman said.

"There is a strong movement towards natural fibres. For example, research shows that people sleep better under woollen blankets and doonas, but competing with petroleum-based fibres is difficult. They are cheap."

Even in these hard times, the industry had a good future, Mr Mr Merriman said.

"Apart from wool, Australia has such a good lamb and mutton industry that it makes rearing merinos a good prospect."

Sheep farmers get renewable wool as well as meat -- food and fibre in one package.

Mr Merriman has noticed that wool prices are a good indicator of the world's markets and confidence.

"Wool is a very good barometer of economic activity," he said. "Wool prices were headed up before the global financial crisis. It came right off in the crisis and is just starting to go back up again -- off a low base, it's true, but to put things in perspective the wool market dropped 25 per cent during the crisis but shares lost 60 per centand more. Now, the wool indicator is up 5.5 per cent to 6 per cent in the past month, which suggests the world's markets are strengthening."

For the mid-term future, Mr Merriman expects a fight from the industry over the Government's carbon trading policies.

"Carbon trading should be excellent for farmers and would be if the rules were fair, but they're not," he said.

"Most farms would be carbon neutral if you took into account everything the farmers have already done, and continue to do -- the landcare, tree planting, all the perennials that are grown to take up salts in the soil, as well as annual plantings and water management. But none of these things are taken into account.

"The Government is trying to say that the whole of Australia's agriculture, but especially grazing, creates a carbon deficit, yet it puts nothing on the other side of the ledger."

As for the future of Merryville stud, it will be in good hands.

"My brother has some sons, and I have some daughters who are keen to go on the land, so the stud will stay in the family for another round," he said.

"In our family history, each generation has bought out the family members who were not interested in staying on the land. Each generation has had to sort out its own succession arrangements, and so will this one."

The good wool prices in the 1980s and good stud sales in the 1990s had given the family a strong income and allowed expansion, he said.

"But now land prices are so high that there is no expansion on the horizon for anyone, except maybe corporates," Mr Merriman said.

"Corporates come and go, investing in an industry and then selling out. They are cyclical, like the market itself."

In the past 10 years, corporate investors have become seriously interested in long-term global food supplies and will probably remain in and about Australia's meat livestock industry. But even so, for Mr Merriman, it is better to have them in the industry than in the family business.