Australian Wool Innovation’s revenue to plummet as demand falls
The body in charge of marketing Australia’s wool clip will have to tighten its belt as revenue falls from weakened demand for the natural fibre.
AUSTRALIAN Wool Innovation’s revenue is expected to plummet by more than $25 million as COVID-19 turmoil smashes wool grower returns.
AWI has halved the number of projects it is funding compared to two years ago, and will cut staff numbers by 40 per cent in response to the hit to its levy and other income streams.
AWI’s revenue will fall from around $80 million last financial year, of which about 40 per cent comes from levies, to an estimated $55 million in the 2020-21 period.
Now, according to the leader of the wool growers’ R&D and marketing organisation, the Australian industry’s hopes remain pinned to the appetitive for wool from the economy and consumers in the rising superpower, China.
The viral pandemic has hit the wool market hard with wool prices almost halving, compared to this time last year, and the outlook remains muddy.
AWI chief executive Stuart McCullough told The Weekly Times this week he could not see a clear way forward for a wool price recovery anytime soon.
“You’re asking about the light at the end of the tunnel, the light that we are seeing at the other end of the tunnel is probably just another train coming in the other direction – we just have no optics on what sales will be like later on this year,” he said.
Looking forward, a 20 per cent reduction in Autumn-Winter wool garment sales would be “a good number”, he said, hinting that he expected retail sales figures to be much worse.
One positive was some good signs of commercial activity and consumer interest from China. “To be honest, China is the great hope for us,” he said, adding that although the country’s economy had been under pressure, there had been some positive signs of recovery.
“China is number one, two and three for us.”
AWI was adapting to be “very nimble” in its ability to respond to COVID-19, he said, and would draw down around $15 million “very prudently” this year from the approximately $100 million cash it has in cash reserves.
WoolProducers Australia president Edward Storey said he expected it would take several years to recover from the hit to wool sales, but he was comfortable with how AWI was approaching the reduction in its revenue.
Meanwhile, better seasonal conditions will help stabilise the country’s wool clip volumes.
The national wool forecasting committee tips 280 million kilograms of greasy wool will be produced on Australian farms this season, 1 per cent shy of last financial year’s yield.
Committee chairman Russell Pattinson said welcome recent rain in much of NSW, Victoria, Tasmania and southern Queensland was tempered by persistent dry conditions in much of
Western Australia, pastoral South Australia and central Queensland, meaning the impact of the prolonged drought would carry-over into the current season.
Australian Bureau of Statistics data to the end of June showed sheep and lamb turn-off decreased 10 per cent on the previous season, while the June AWI-MLA Wool and Sheepmeat survey found almost half of all producers intended to keep on more breeding ewes, compared with 28 per cent last financial year.
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