HOW has an industry-owned organisation that relies on total volume of wool, managed to generate revenue when volume has decreased by almost 500 million kilograms in the last three decades?
This is the question Australian Wool Testing Authority (AWTA) Eastern Australia sampling operations manager Tim Steere attempted to answer at a woolgrowers evening at Goornong.
Local farmers attended the event, organised by Karee Wool, on Monday night, where they heard presentations about wool testing and marketing their clip.
The main guest speaker was Southern Aurora partner Mike Avery, who spoke about how sustainable current high wool prices are into the future, and provided insight into the financial wool contract, via the Sydney Futures Exchange, as an option for growers to manage their forward risk by establishing an agreed price, micron and quantity with an export company.
Mr Steere presented on how an industry-owned organisation that relies on total volume of wool, managed to generate revenue when volume has decreased by almost 500 million kilograms in the past three decades.
Mr Steere said the organisation was not-for-profit, so its aim was to break even.
“We’re owned and operated by the Australian wool industry, so because our owners are also our biggest clients, they keep a tight rein on us,” he said.
“If we’re making profit, it means we’re charging our owners too much, so we’ve returned anything that we would make back into the industry.”
He said woolgrowers relied on AWTA’s wool tests, as it was almost impossible to trade wool without one.
“An entire test nowadays costs $81, which is seven cents a kilogram,” he said.
“Around 10 years ago, tests were $69, so the cost hasn’t really gone up much in that time.”
He said this was an incredible feat, given the volatility of the market in recent decades.
“From 1992 until last season, we’ve seen some big drops in the volume of wool, it was sitting at 820 million kilograms, and now sits at about 250 million kilograms at the moment,” he said.
“So how have we managed, with the volume of wool declining so significantly, to maintain our fees, when all of our other operating costs have gone up so much?”
Mr Steere said there were numerous ways AWTA worked to achieve this.
“There’s lots of innovation, we have our own research and development department here, that are constantly coming up with lots of ways to refine the way we’re testing,” he said.
“It has also meant that over the years, we’ve developed more accurate ways to test.”
Mr Steere said productivity was another focus.
“One of our highest operating costs is labour, so we’ve started introducing robots into the labs,” he said.
“We’ve controlled our costs by using robots, which has meant we’ve had to make cuts, we used to have three wool testing labs in Australia, in Melbourne, Sydney, and Fremantle, but we closed down the Sydney one, and now all wool from the east coast is tested in Melbourne.”
He said they have also worked to diversify the business, so it is not solely reliant on wool testing revenue.
“In the past eight to 10 years, we’ve branched out and purchased other businesses, so now 30 per cent of our revenue comes from those businesses,” he said.