Melbourne and Geelong stand out as the most likely locations for a strategic revival in early stage wool processing in Australia.
The second stage of a big wool industry study into options to de-risk Australia's global wool processing supply chain has highlighted our reliance on overseas processors, particularly China.
It also identified an animal disease outbreak in Australia, such as foot and mouth disease, as possibly our most significant supply chain risk.
In the event of a foot and mouth emergency, global animal health protocols demand raw, greasy wool would need to be treated in temperature controlled environments for up to four months before export.
No part of the wool supply chain locally or overseas is set up to store greasy wool in a temperature controlled environment.
Apart from outlining a business case for expanding processing in Australia - which produces 80 per cent of the world's apparel wool - the weighty report also highlighted opportunities to collaborate with, and cultivate, early stage processing in Vietnam, India and Bangladesh.
Melbourne and its neighbouring Barwon region were viewed as the most financially viable and best resourced locations for local wet processing.
Other shortlisted options were the NSW Riverina, based on Wagga Wagga; Dubbo, Forbes or Parkes in Central West NSW; northern Adelaide, and the green triangle region between Mount Gambier, Portland and Hamilton on the Victorian-South Australian border.
The list was pared down from an initial 20 potential processing locations, including greater Sydney and the Northern Tablelands in NSW; Central Queensland and the Darling Downs; northern Tasmania, southern West Australia and Perth.
The business case was based on assuming any new wool scouring plant could comfortably handle 15 million kilograms a year and employ about 140 staff.
Australia produces about 228m kilos of greasy wool annually.
The study found commercial viability of wool processing depended on factors such as locations which could maximise access to wool aggregation points to enable cost effective sourcing and fibre blending.
Also needed were good links to existing transport corridors to minimise freight costs and sufficient water and capacity to treat the worst wool scour effluent to a point where it could be economically discharged with minimal environmental impact.
Access to appropriate gas, electricity, labour and land purchase costs were also calculated.
The 94-page report, commissioned by the industry's peak grower body, WoolProducers Australia, and compiled by Deloitte Access Economics, noted how all but six per cent of Australia's wool exports were now processed offshore, with China handling 79pc.
That number compared with Australia's most valuable agricultural exports, beef and wheat, which exported about 70pc of their output.
Those sectors only relied on their largest markets each taking a maximum of 20pc of their exports.
The risk of relying on such a dominant partner country had been partly illustrated by recent policy changes which blocked Australian wine and barley exports to China when hit with tariffs and countervailing duties of 80pc to 212pc in 2020.
The Deloitte report said in contrast to barley, wine and many other agricultural exports, "wool does not have the potential to easily substitute to alternative partners".
Wool was also exposed to country risk further down the supply chain because China dominated processed textile supplies to much of the world.
WoolProducers general manager, Adam Dawes, said expanding Australia's early-stage processing, most likely focusing on pre-export scouring, would also require overseas supply chain adjustments.
Our processed exports would need to go to a diversified mix of countries with new topmaking operations and existing spinning operations, or plans for such developments.
Road maps for expanding early-stage wool processing in Vietnam, India and Bangladesh, which already had well established textile industries, were part of the wool industry study.
Importantly, the project found downstream supply chain partners, including spinners, knitters, weavers and garment manufacturers, also wanted to expand their supply chains to mitigate their procurement risks.
Supply chain diversification and expansion is in everyone's interest, but it's no-one's responsibility- Adam Dawes, WoolProducers
Mr Dawes described the wool textile supply chain as one of the most complex agri-product chains in the world with many interdependent steps.
"Supply chain diversification and expansion is in everyone's interest, but it's no-one's responsibility," he said.
"With Australia producing the vast majority of the global apparel industry's wool supplies we need to continue investment in this space."
The Deloitte report, which had guiding input from Australian Wool Innovation, wool brokers and exporters, has recommended Canberra establish a three-year wool trade policy program.
It would support the trade and mitigate trade risk while also starting to implement the business case for local processing and de-risking supply chain exposure.
"To future-proof the Australian wool industry and the prosperity of rural and regional communities it supports, this work must be sustained by trade policy activities to ensure the opportunities identified materialise into tangible actions," Mr Dawes said.
WoolProducers president, Steve Harrison, said the substantial contribution from many supply chain stakeholders had demonstrated what could be achieved when the sector worked together towards a common goal.