Fallout from the levy vote

The results of the grower ballot (closed 3 March) announced on 14 March, showed that, on the basis of preferential votes, 61% favoured a 2% levy, and 39% preferred the 3% levy option (compared to the current 3.5% for promotion and 0.5% for research).

The likely outcome

With Commonwealth funding of the Wool CRC ($2.6 million per year) about to cease in June 2000, the potential fall in levy funding comes at a critical time for the wool industry. It is small comfort that, during the debate of recent months, growers have tended to favour support for R&D. The important message is, however, that each R&D dollar has to be backed up by several dollars for extension, product development and product marketing (the McLachlan Taskforce recognised the logic of one composite levy). In the case of post-farm research that claim may seem more obvious (Figure 1), but even on-farm research has to be consumer oriented one way or another.

Leverage effects

A 2% drop in levy funding for research and promotion can be readily estimated at over $50 million (at current prices), but the implications of the vote do not end there. For example, the industry seems to have grossly underestimated the implications for the research effort sourced from other quarters due to the loss of leverage created by grower funds.

A good example is CSIRO’s Textile and Fibre Technology (TFT) Division, known as the Wool Technology Division until last year. Its wool levy funding has declined from around $15 million in the late 1980’s (over 60% of its total income) to $5 million in 1999/2000, roughly 24% of its budget.

CSIRO (TFT) is already shifting its research emphasis. As a participant in the new Cotton CRC it expects to see its external funding for cotton research rise to $0.5 million by next year. In addition, TFT is a lead party in putting together a bid for a new CRC (Round 6), ‘Technical Textiles’, in which the opportunities for wool are limited.

Unfortunately, the examples don’t end there. CSIRO Animal Production in 1999/2000 will receive $400,000 from levy funds well down from the $6.1million peak and only 1.8% of their total expenditure. As CSIRO’s research emphasis shifts markedly, the same is occurring at universities and departments of agriculture throughout Australia. The implications are particularly significant for postgraduate research, the source of our future wool scientists.

Moreover the shift is worldwide. Figure 2 shows the sort of global wool research structure that previously existed and the central role played by the (then) IWS in the extension of research outcomes. Today, Australia conducts most research relating to apparel wool and New Zealand carries the burden for interior textiles. In South Africa, for example, there is no longer a wool levy and expenditure on post-farm wool research has dropped in a few years from 0.87% to 0.24% of the value of production (which itself has declined markedly).

What needs to be done?

It would be too defeatist to accept a further contraction of wool R&D funding as inevitable. The wool research community will need to double its efforts to convey to government, the wool industry and the successor to The Woolmark Company, the serious risks posed by the grower vote and to argue for a more commercially responsible decision based on an objective assessment of the industry’s research requirements. The inclination of growers to lower their levy payments is understandable. They probably take for granted the numerous technologies that have enabled wool to compete internationally as a textile fibre. They tend also to see an ongoing levy as a cost rather than as an investment in future competitiveness. Moreover, growers are
seen as bearing that cost on their own, whereas in reality the costs AND benefits are shared along the pipeline not to mention the considerable investment in wool R&D by private companies themselves. Maybe this coming year could be spent communicating to growers more effectively the essential nature of wool R&D, its inextricable links to extension and marketing and its critical role in the future of the wool industry. A decision whether to lift the levy again could then be determined through a straw poll rather than an expensive ballot.

In this issue of The Wool Press: