WoolProducers Australia will delve into onshore processing options and how to tap into new markets thanks to a federal government grant.
The $662,000 grant is part of the Australian Government's Agricultural Trade and Market Access Cooperation program and will fund a project calledEnsuring a sustainable Australian Wool Industry through market diversification and risk mitigation.
The project will undertake a feasibility study that will be undertaken in two parts, the first being an economic assessment of domestic processing.
WoolProducers CEO Jo Hall said the study would aim to investigate the viability of domestic wool processing.
"We started looking into this about 12 months ago," she said.
"It's sort of always been a question given that we export around 93 per cent of our raw wool why aren't we doing more processing at home... going back to the 1990s we had a moderate early-stage processing sector in Australia but that went off-shore like so many of our manufacturing sectors for various reasons including increased wages and energy costs.
"What we want to achieve through this grant is either rule it in economically, or rule it out because we don't want to set up a sector that's just not going to be viable going into the future."
Ms Hall said that the industry needed to look at all the barriers to re-establishing domestic processing as well as the potential economic benefits that could come from having greater onshore processing options.
"We identified early on in the process that the critical choke point in wool's long supply chain is early stage scouring, carbonising and top-making, so we focused our energies on seeking funding to thoroughly assess this proposition," she said.
The second part of the study will assess opportunities to develop or enhance processing capacity in diversified onshore and offshore locations.
Ms Hall said that would include looking at if there were countries processing some Australian wool that could be ramped up to process more.
"China and Australia have a great relationship in the wool industry so this is looking at whether we can establish a complementary sector to existing trade relations," she said.
"It is about risk mitigation at the end of the day.
"We would never go into competition with China because they are such a big user of our wool currently, but it's looking at that diversification up until to the point of top-making.
"Globally there's around 100 early stage processors, about 5000 spinners and dyers and then 50,000 knitters and weavers, so once you go further along the supply chain, we don't know that it would be viable to go into competition with all of those other operators."
Work is already underway to set up a steering committee of industry members and service providers to guide the project, with a tender process to be undertaken to engage independent consultants early in 2022.
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Agriculture minister David Littleproud said the grant would have help identify new opportunities for the Australian wool industry.
"Currently, the bulk of Australia's wool clip is exported to and processed in a small number of markets," he said.
"If there's one thing the global pandemic has taught us, it's that market diversification is important for healthy industries.
"By looking for alternative markets for our wool, we can make sure we aren't falling into the trap of putting all our eggs in the one basket.
"This grant will examine the feasibility of bringing back early-stage processing of greasy wool in Australia. It will also examine the feasibility of early-stage processing in offshore locations, providing our wool producers with new markets.
"It could also mean investment into manufacturing, greater job opportunities in our regions, and a chance to value-add to our wool before export."
Michell Wool executive director David Michell welcomed the announcement.
"As a proud Australian family company with a solid 150-year history in the Australian wool industry, we would be delighted to see a return to early-stage domestic processing and believe we would be well positioned to play an active role in that, bringing our decades of experience to the fore," he said.
"We run a highly sophisticated processing plant in Salisbury, Adelaide and believe there's a real opportunity to re-establish domestic early-stage processing by embracing modern manufacturing processes including automation, as well as efficiencies in energy and water usage.
"By expanding market access opportunities, effectively creating more competition for quality Australian wool products, there would be beneficiaries right along the supply chain, as well as the generation of additional jobs and economic activity."
It is expected that both stages of the feasibility study will be completed within a year.
The final report will be made publicly available.
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