Final Report

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‘Future for Traditional Superfine’ Project - Full Report
‘Future for Traditional Superfine’ Project
Full Report
This report is an outline of the key issues identified by the ‘Future for traditional
superfine’ project. These include salient points arising from a round of meetings with
operators of key Italian fabric mills. It is intended this report be circulated amongst
ASWGA Council and grower members and other parties as deemed appropriate by
ASWGA Council.
This report includes project findings, matters for consideration, and comments related
to the internal operation of ASWGA. It does not include ‘commercially sensitive’
information.
1 PREAMBLE
The ‘Future for Traditional Superfine’ project was created due to a growing number
of Australian Superfine Wool Growers’ Association (ASWGA) members concerns
with a lack of viability within the ‘traditional’ superfine woolgrowing sector.
These concerns largely centred on low profit margins for this type of woolgrowing
enterprise and loss of market opportunities for this type of wool. With this in mind,
the project focused on an evaluation of the likelihood that current market
opportunities will deliver viable returns for growers in the foreseeable future.
The project did not consider ‘over the horizon’ market opportunities such as the use of
high resistance to compression wool in lightweight knitwear, although representatives
with AWI Ltd are confident such opportunities are worth pursuing. The reason the
project focused on current markets such as Italian fabric manufacturing is that given
the current state of the traditional superfine sector, exploiting current markets was a
necessary condition for its viable future.
The basis upon which the project conducted its evaluation was to differentiate
between high crimp frequency superfine merino which is generally regarded as
‘traditional’ superfine wool (74’s or higher in the old Bradford Count system) and the
more bolder crimping superfine wool with less crimp frequency (say, less than 70’s
count). This was considered necessary as the two types were found to have contrasts
in terms of market opportunities, demand drivers, COP’s, supply volumes and
methods of production.
In fact, viability within the traditional superfine sector was arguably constrained due
to key market signals being camouflaged or confused by amalgamating both types of
superfine under the one definition.
It was felt that while traditional superfine wool was consumed within the overall
superfine category, the price paid to growers might not benefit from accurate market
signals at an apparent time when reduced supply should have resulted in price
increases.

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Further, a lack of differentiation between superfine wool destined for the volume
China market and superfine wool suitable for the European luxury apparel market
might result in misdirected marketing initiatives.
In order to provide a mechanism to delineate between the two superfine wool types,
regular supply data reports were created based on curvature and micron. Curvature is
highly correlated with crimp frequency. These reports were created from data
supplied by the Australian Wool Testing Authority and with the assistance of the
ASWGA Public Officer, Dr Peter Morgan. The reports confirmed bold crimping
superfine type was increasing in volume at about 8% per annum while traditional
superfine types were decreasing at about 7% per annum (see Section 2 and Tables 1
and 2 below).
Having established a method to differentiate the two superfine wool types, and having
confirmed the two opposing trends within the superfine sector, the ‘Future for
Traditional Superfine’ project proceeded in three directions. The first was to monitor
supply volumes for the two types of superfine wool. The second was to compare the
profit margins for the two superfine types plus two other comparable woolgrowing
enterprises. The third was to conduct a round of talks with key Italian processors who
use high crimp frequency superfine wool to gauge future prospects for viable returns
from existing markets.
Having considered the viability of the traditional superfine sector, and in the light of
material and information obtained, the report then considers a future direction for the
superfine wool industry and in doing so, suggests a revised role for ASWGA
2 MONITORING THE SUPPLY OF TRADITIONAL SUPERFINE WOOL
As previously mentioned. AWTA has commenced providing test data that categorise
the supply of superfine wool based on average Fibre Diameter and Curvature The data
is derived from core test results for virtually all wool lots received into the Australian
wool exchange system, including wool consigned through direct contracts where core
test certificates are required. All wool lots consigned through the auction system are
included in the data.
AWTA core testing utilises Laserscan measurement equipment. This is noteworthy as
OFDA technology is known to produce different curvature results for any one sample
when compared with Laserscan technology.
Of interest to this project is the supply trend for <=18.5 micron wool with curvature
=>80 degrees/mm which is referred to in this report as ‘traditional’ superfine. Industry
advice supports 80 degrees/mm as being indicative of wool of 74’s type in the old
Bradford counts system.
Table 1 shows the current analysis of AWTA data for FY’s 2012/13 through to
2015/16 as YTD figures for July to April (10 month period).
As can be seen from the table, supply of <=18.5 micron, =>80 degrees/mm (trad s/f
type) has been reducing at about 7% per annum, but that the rate of decrease climbed

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to 40% for the period FY 2015/16. The overall decrease in volume since end FY 2013
was 48.6%. Of further note is the very high crimp frequency wools (curvature
=>90 degrees/mm) have almost completely disappeared with a 67.4% decrease since
2012/13.
While the reports show a dramatic decline in supply of traditional superfine wool
(curvature =>80 degrees/mm), the mills who use this wool may be reluctant to accept
the data at this stage for two main reasons.
Firstly, AWTA superfine supply figures in the past have combined all wool <=18.5
microns together, ie, the more popular bolder crimping types with the traditional, high
crimp frequency types. As a consequence, the decline in the supply of traditional
superfine wool has been camouflaged within the much greater volume increase of the
bolder crimping types. As the reports reveal, the increase in the bolder crimping types
(<70 degrees/mm) have increased by almost one third since 2012/13.
It is for this reason the previous AWTA production reports have shown increases in
the overall supply of ‘superfine’ wool. These production reports are received by most
European mills. The likely outcome of these messages is that mills may consider the
increase in supply of all superfine wool extrapolates to an increase in supply of
traditional superfine wool.
These misleading, but long-standing, market signals tend to undermine the
acceptability of our more recent and more precise data.
Secondly, our analysis indicates total annual supply of traditional superfine wool for
2014/15 at about 4,400 tonnes (aprox 26,000 bales), while projected annual volume
for 2015/16 is estimated at 2,700 tonnes (16,000 bales). The shortfall in meeting
supply contracts for this type wool during the 2015 superfine buying season may have
been offset through purchasing old season wool held in storage and buying choice lots
of ‘Broken’ lines and types just outside normal specifications.
The reduction in supply of traditional superfine wool is expected to have a significant
impact on supply orders over the 2016/17 superfine buying season. We may need to
wait until this occurs before mills become sensitive to the reduction identified in our
production reports.
The complete data analysis report for end of April 2016 is attached as Annexure 1.
Further, given the need for precision and accuracy in the compiling of this data, an
outline of our internal checks to validate the integrity of our procedures is attached as
Annexure 2 – Validation of supply data analysis.
Responses by mills to this data is included in Section 4.3 of this report.

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Table 1 – Volume of <=18.5 Micron Merino for 10 Months Period July to April
WEIGHT OF FLEECE WOOL AND SKIRTINGS OF <= 18.5 MICRONS (tonnes) TESTED AT AWTA
LTD
JULY TO APRIL DATA
FIBRE
CURVATURE
YEAR 2012/13 to 2015/16
2012/13 2013/14 2014/15 2015/16 CHANGE % CHANGE
<70 deg/mm 41,150 50,417 47,961 52,344 +11,194 +27.2%
>=70 deg/mm 17,652 17,662 18,372 13,442 -4,210 -+23.8%
>=75 deg/mm 9,639 9,311 9,002 6,156 -3,483 -+36.1%
>=80 deg/mm 4,891 4,497 4,132 2,515 -2,376 -+48.6%
>=85 deg/mm 2,115 1,959 1,622 901 -1,214 -+57.4%
>=90 deg/mm 828 763 596 270 -558 -+67.4%
All Wool <=
18.5 microns
58,802 68,079 66,332 65,786 +6,984 +11.9%
Table 2 – Total Volume <=18.5 Micron Merino 12/13 with Projected Volume for
15/16
PROJECTING FORWARD FROM THE END OF APRIL TO THE END OF JUNE 2016
Fibre
Curvature
2012/13
(Actual
Weight)
(tonnes
2015/16
(Est Weight)
(tonnes) #
12/13 to 15/16
(Difference in
Weight)
(tonnes)
12/13 to 15/16
(Difference in
Weight)
(%)
14/15 to 15/16
(Difference in
Weight)
(%)
=>75
Deg/mm
10,388
6,791 -3,597 -34.6% -34.1%
=>80
Deg/mm
5,185
2,729 -2,456 -47.4% -40.9%
=>90
Deg/mm
845
286 -559 -66.2% -56.3%
Wool <=
18.5µ
70,500
78,789 +8,289 +11.8% -1.3%
The Estimated Weight for 2015/16 has been calculated by projecting forward from the July to
April data.
Please Note, the July to April data for =>75, 80 and 90 Degrees/mm averaged 93% of the total for the
full 12 months period in the 2012/13, 2013/14 and 2014/15 seasons.

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3 COMPARING GROSS MARGINS FOR VARIOUS WOOL GROWING ENTERPRISES
Having identified significant declines in the supply of traditional superfine wool, the
project considered it appropriate to compare income for traditional superfine
woolgrowers against alternate forms of wool growing enterprises. This study was
undertaken due to anecdotal evidence that growers would achieve far greater returns
by redirecting their enterprises to heavier cutting, non traditional superfine type sheep,
or shifting some enterprise focus to fat lamb production. If a comparative evaluation
of gross margins for these enterprises supported the anecdotal evidence, then this
might explain the steep decline in the production of traditional superfine wool.
To undertake such evaluation, the Future for Superfine Project engaged the
professional services of Holmes Sackett Pty Ltd. Holmes Sackett are an agricultural
consultancy firm who have the largest agricultural benchmark portfolio over the
eastern states of Australia.
Four wool growing enterprise scenarios were selected:
1. Superfine wool production focusing on high frequency crimp
2. Superfine wool production forgoing focus on crimp frequency in place of
increasing fleece weights
3. Wool production towards 19 microns with emphasis on fleece weight
4. Superfine wool production combined with fat lamb production
The key findings of this report are attached as Annexure 3.
The evaluation showed traditional superfine production was the least profitable
enterprise of the four. The main reason for this was that while fleece price per kilo
remained similar to the other enterprises, fleece weights were significantly lower
thereby resulting in less revenue per DSE (say, unit of carrying capacity).
It is worth noting that high crimp frequency has been shown to be highly correlated to
low fleece weights, (Gregory, I. P. 1982a. Genetic studies of South Australian
Merinos)
To place the ‘net profits per dse’ figures into a ‘whole of enterprise’ scenario for, say,
a hypothetical property with 5,000 DSE, the net profit for a traditional superfine
enterprise would be $20,700 while a non traditional superfine enterprise would be
$65,500 with a superfine wool with fat lamb enterprise being $83,350.
From the Holmes Sackett study, it would be reasonable to suggest the reduced
volumes of traditional superfine wool are attributable to growers moving towards
more profitable enterprises.
It should be noted that documentary evidence provided by some superfine
woolgrowers suggests the income disparity between traditional superfine enterprises
and superfine woolgrowing enterprises focusing on fleece weight is considerably
larger than that shown in the Holmes Sackett report.
It is strongly recommended that individual growers should not rely on the Holmes
Sackett data when considering their own enterprise options, but should carry out
analysis of potential margins based on their own specific circumstances.

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Responses by mills to this report are included in Section 4.2 of this report.
4 MEETINGS WITH ITALIAN MILL OPERATORS
During April 2016, meetings were held with executives from Ermenegildo Zegna,
Vitale Barberis Canonico, Successori Reda spa and Marzotto Wool Manufacturing.
All these mills use high crimp frequency superfine wool for luxury apparel (fabric)
manufacturing. The first thing that should be mentioned is that all mills indicated a
commitment to purchasing high crimp frequency wool in order to achieve the
resilience or drape with their fabric. It had been stated to us that drape is what, in part,
epitomises the Italian brand.
In terms of a global market outlook for luxury fabric making, a desktop review of
papers such as The Textile and Apparel Industry in Italy: Current State and
Challenges to Further Growth. 2010 and Deloitte’s Global powers of luxury goods -
In the hands of the consumer, 2014, the outlook might conservatively be described as
‘positive to buoyant’
The salient points raised during these meetings are as follows.
4.1 Animal Welfare
There is no sector within the global wool industry that has more at stake from this
provocative issue than Australian superfine merino production. From the information
gathered during our Italian meetings, our position might be described as precarious as
the message that we could do far better in handling this issue was made very clear to
us.
The mill operators expressed a sense of betrayal by the Australian wool industry in
that it terminated its strategy of phasing out mulesing by 2010. As part of this
strategy, the use of pain relief was seen as a transitional tool. The mills are now of the
understanding that the Australian wool industry regards ‘pain relief’ as a final
solution, and that the commitment to phase out mulesing has been terminated.
In the face of mounting pressure from their retail outlets to supply fabric sourced from
mules free wool and the change in direction from the wool industry combined with
criticism with the manner in which the wool industry responded to the anti mulesing
campaign, this became the dominant point of discussion put forward by the mill
operators during the meetings.
Further discussion on the mulesing/animal welfare issue is covered in Section 5.2 of
this report. The final comment made in this section of the report will be part of the
motion presented by European attendees at the IWTO World Conference held in
Sydney recently (see next page).

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MOTION – ANIMAL WELFARE
 The premise is that, after many discussions about mulesing and animal
welfare, we find ourselves today in a situation if at all possible even worse
than 10 years ago…We don’t have as of today any credible document to show
to our clients around the world…It’s clear that, if we are still discussing the
same issue after so many years, the actions taken and messages given were
insufficient, or at least did not work
 The conclusion, based on what we can gather from something which we will
show you at the end of this brief presentation, is that, if we don’t act fast and
purposefully, soon we’ll all have a product, our beloved wool, which will
much harder to sell.
 We, in Italy and Europe, are frankly disappointed by a never-ending list of
undelivered promises, unmet deadlines, mistaken assumptions and
inadequate conclusions…We don’t feel backed and protected in our efforts
to try and promote wool, and European brands are considered to be quite
influential in deciding which kind of raw material is used in the collections
The motion will be raised again at the IWTO Roundtable in Biella in November 2016.
4.2 Responses to the Holmes Sackett report
Mills were provided copies of the Holmes Sackett report to explain the drop in the
production volumes for traditional superfine wool. The report does this by revealing
that traditional superfine wool growers are financially disadvantaged by pursuing this
form of enterprise, and that financial viability might best be served by pursuing other
enterprises.
Some mill operators expressed strong doubts as to the veracity of the average fleece
price for traditional wool clips as reported in the study. The average clean price per
kilo in the report was $12.88 compared to $12.47 for non traditional superfine clips.
In support of the fleece prices quoted in the Holmes Sackett study, anecdotal evidence
from a number of traditional superfine growers was that no more than half of their
fleece lines made premium priced contracts, with most of these lines making the
lower tiered contract levels with commensurate lower pricing. These lower tiered
premiums are generally about 10% above the market indicator. Given the average
fleece prices quoted in the Holmes Sackett study includes all lines within the
respective farm’s wool clip including pieces etc, and given the Holmes Sackett
average fleece price is about 4% above the market indicator, the $12.88 average fleece
price appears to be reasonable.
4.3 Responses to the supply volume report
As mentioned in Section 2 of this report, our own analysis of requested AWTA
curvature data revealed on average 7% per annum reduction in volume of ‘traditional

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superfine’ wool from 2012/13 through to 2014/15, but a massive 40% reduction in
volume over 2015/16.
Also, as mentioned in Section 2, this trend was contrary to the previous production
reports that combined all superfine volumes. Further, mills may have escaped
significant shortfalls on order due to purchasing wool held in store and purchasing
selections of ‘Broken’ lines or types just outside normal specifications. For these
reasons, it was expected the mills might not fully accept our supply data. During the
meetings, this in fact appeared to be the case.
While mill operators acknowledged there existed a downward trend in supply, it was
apparent the market will need to be tested through their actual purchase data before
supply driven price adjustments are expected.
Many Italian mills have ‘volunteered’ price premiums well above market with the aim
of encouraging growers to maintain production levels. These initiatives need to be
commended, although in most cases, they apply to only a portion of the fleece clip. It
should also be acknowledged, however, the true test as to the success of any incentive
pricing is its eventual impact on production levels. Given the recent and dramatic
reduction with production levels, there remains the question as to whether the current
price premiums are doing their job. From our observations, this does not appear to be
the case at the industry level.
To reiterate, however, these mills need to be commended for their initiative in
volunteering price premiums.
Our supply analysis reports will now be provided to mills on a regular basis.
4.4 Observations specific to Barberis ‘Wool Excellence Club’
One discussion that was worthy of further consideration was the procuring of wool
from member growers of the Vitale Barberis’ ‘Wool Excellence Club’. These
contracts offered substantial premiums for wool described as Saxon or near Saxon
type.
Saxon type is characterised by very high crimp frequency wool, often of relatively
short staple with a more blockier staple formation. This is in contrast to the
increasingly popular, longer and more open stapled type sheep. One reason these open
stapled types are becoming more popular is that they typically cut more wool and are
easier managed due to their plainer skin type with consequent lessened susceptibility
to fly strike.

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Image 1 Saxon type wool shown on left. Open style, traditional superfine type
on right
The point of note in all this is that studs or brokers might likely discourage growers
from breeding these Saxon type sheep due to their low fleece weights and high
susceptibility for fly strike. Anecdotal evidence suggests this is occurring.
The premiums currently available under these contracts, however, give valid reasons
why growers might well do their sums before discounting such a genetic pathway.
Prices as at December 2015 show price premiums up to almost double market
indicator price. In fact a further 10% premium is provided under the contract for non
mulesed wool. These premiums may result in increased net margins even after taking
into account extra management costs and reduced fleece weights.
It should be stressed that the above comment relates to a very small and specific
market, and therefore does not contradict previous comments made in this report that
relate to supply and demand factors at the more ‘macro’ industry level.
Alberto Barberis advised membership into their ‘Wool Excellence Club’ was by
invitation or by way of application from growers, and is open to breeders of Saxon or
similar type sheep. It is noted that a number of superfine woolgrowers were of the
impression that entry to the club was only by way of invitation.
While other mills have their own clubs or direct contract schemes, this case was
worthy of noting as it highlighted a potential role for ASWGA acting as an
information conduit so that superfine woolgrowers receive updated, factual
information on the range of direct contracts and preferential buying schemes.
While some service providers to the industry have a professional role to pass
information from buyers and mills etc to woolgrowers, the Excellence Club example

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provides evidence where passage of this information might be improved upon if
included as a function of ASWGA.
4.5 Capitalising on the Traditional Superfine’s Differential
The range of market opportunities specific to traditional superfine wool is derived
from its product differentiation based on crimp frequency. The crimp frequency is
highly correlated with high resistance to compression, which in turns provides the
resilience or drape of the fabric.
This differentiation delivers market opportunities, albeit with the limitations
mentioned in this report, for traditional types by targeting those markets more likely
to pay premiums in order to achieve certain fabric qualities associated with luxury
apparel.
This implies a need to class and consign traditional types in a manner that capitalises
on the differential. That is, growers who wish to target these markets should class
wool according to desired crimp frequency, and in fact, other key demand traits
without compromise to commercial volume and usual clip preparation standards. This
point was raised by at least two mill operators.
As referred to earlier in this report, some service providers to this industry such as
wool brokers, have a professional role in advising growers on clip classing
specifications, however, ASWGA may also assume a function in this regard,
particularly given the anticipated close liaison the association will develop with Italian
fabric mills.
The comment is confined to those enterprises that focus upon traditional superfine
production, and does not compromise the report’s overall findings in relation to
viability for this sector.
4.6 Project for Supply Agreements Involving ASWGA and Italian Fabric
Mills
(Commercial in-confidence)
5 PROJECT FINDINGS AND DISCUSSION
5.1 Future Viability for Traditional Superfine Wool Production
In considering the prospects for commercial viability of high crimp frequency
superfine wool production, the project has maintained an indicative description of
such wool as being <=18.5 microns with =>80 degrees/mm curvature. This wool
might also be described as 74’s type or higher in the old Bradford Count.
The volume of traditional superfine wool has fallen from 5,185 tonnes produced over
2012/13 (almost 30,000 bales) to a projected 2,728 tonnes for period 2015/16 (about
16,000 bales). While the volume has halved over this period, it is noteworthy the
current rate of decline is reported as about 40% per annum. Therefore, a volume for

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2016/17 might reasonably be projected at between 1,900 to 2,200 tonnes (11k to 13k
b’s). As an annual rate of reduction is unlikely to be maintained at 40%, a reduction
rate of between 20 to 30% is predicted for 2016/17. It is, however, conceivable that
production be reduced to near 1,000 tonnes for 2017/18 if the reduction rate did
remain at 40%.
Given such a low production volume, two scenarios are likely to play out.
In the shorter term, a supply driven price increase might eventuate once mills
experience significant difficulty in sourcing this type of wool. This shortage is likely
to be felt over the coming two seasons. Given the genetic lead-time to change flock
traits, such a price increase is unlikely to halt production levels slipping for a further
three years. This might consolidate supply driven price premiums. However,
production will arguably slip below levels necessary to sustain this sector’s viability.
In the medium to longer term, such a substantial decline in volume may encourage the
fabric industry to develop innovations to avoid the need for high crimp frequency
wool to achieve drape in menswear suiting. This is the main purpose for using these
wool types over other types. Meetings in Italy gave some indication that R&D was
proceeding in this direction. The consequence in the longer term is that the reason for
paying any premium for traditional superfine types may largely cease.
In addition to production dynamics, the impact on the integrity of genetics towards
breeding for high crimp frequency wool is also likely to be impacted. The project
found evidence that sheep studs breeding rams for traditional superfine wool had
declined by about 60% over the past 5 years. Given the industry indicators, this figure
is likely to trend downwards. The narrowing of available genetic lines will impact on
breeding in two ways.
As with all breeds with narrowing gene pool, some regression in genotype traits will
occur. On the other hand, infusion of ‘correcting’ genetics is likely to involve bolder
crimp lines, which will by default, move more flocks out of this traditional superfine
type production.
In summary, while there appeared constraints on the long term viability of this sector,
some short to medium term viability might eventuate for individual growers who wish
to continue to supply this type wool, although some risk was attached to this strategy.
Developing elevated assurances for ethical and sustainable production combined with
improved communication between growers and mills may improve the prospects for
this sector.
As a consequence, a future role for ASWGA that gives primary focus to the
traditional superfine sector as it has in the past, appears to be lacking validity.
5.2 The mulesing issue and its impact on opportunities for superfine wool.
Market intelligence continually reveals retail customers of luxury goods are more
likely to be positively influenced in their buying behaviour by images of product
provenance that embraced sustainability and ethics (Finocchiaro, Peter, 2010. Quality
and ethics most important brand values to affluent consumers).

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For this reason, manufacturers of luxury garments are now avoiding wool from
sources that cannot provide assurances of animal welfare.
For instance, apparel giant H&M state on their website “We are in no way involved
with mulesing and buy only from suppliers that guarantee mulesing-free merino
wool.” (Customer Services page, H&M website)
A further example is from major suit making firm Hugo Boss who state “When
sourcing merino wool, HUGO BOSS will give preference to suppliers of knitwear who
use wool from sheep not subject to the mulesing procedure.” (Hugo Boss corporate
website).
The number of such examples grows each year.
In turn, Italian mills are under pressure to source their raw wool from growers with
accreditation as being ‘unmulesed’. With termination of the ‘cease mulesing’
campaign, it is highly unlikely the mills will meet their clients’ expectations.
A further area of concern raised by the mills related to the manner in which the
Australian wool industry responded to the protest groups’ anti-mulesing campaigns.
To date, the wool industry has responded by stating that producing wool in Australia
is a case of either mulesing sheep or the sheep will suffer from flystrike. The subtler
message being delivered is that producers can continue to mules by applying
anaesthetic to reduce their suffering. The other message being delivered is that
growers will continue to mules until such time they are paid a price premium to allow
them to stop the practice.
The feedback from the mills was that irrespective of the veracity of these messages, it
is the image conveyed to customers through these messages that is problematic. It
paints a picture that suffering or harsh treatment of sheep is a necessary element in
producing Australian merino wool . This is in stark contrast to customer expectations.
The key point here is that it is not the subject of the picture that counts, but how the
picture is painted.
Mill operators are encouraging the superfine industry to take a proactive, positive yet
subtle approach to extol current practices of welfare driven production and to engage
with respected animal welfare organizations to help build integrity into the campaign.
The mills would like our industry to adopt welfare standards that actually exceed
current IWTO guidelines. This strategy should replace high profile, provocative and
defensive commentary.
Of particular concern with the meetings was the evidence that some mill operators
were under the impression that almost all Australian woolgrowers had no alternative
but to mules and that pain relief was the final solution. In fact, one mill was
reluctantly considering how to market the use of pain relief to their client base in the
apparent absence of ‘non mules’ consignments. This mill was of the opinion,
however, such a marketing strategy was likely to fail.

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As far as the mills were concerned, New Zealand was the first port of call for the
much sought after, non mulesed consignments. In fact some orders were sighted that
stipulated ‘no Australian wool’ because of the mulesing issue.
In terms of adopting an industry based position on animal welfare, it is worthy of
noting the difference between an appropriate position relative to the high volume
Asian markets and one that is relative to the luxury apparel markets of Europe. With
this in mind, an animal welfare position specific to Australian superfine production
appears prudent.
One set of minimum standard guidelines governing ethical and sustainable wool
production that has been adopted by the superfine industry is the ‘Sustainawool’
accreditation scheme coordinated by New England Wool P/L. While development of
such a scheme can only be commended, the sad fact for growers is that a buying
syndicate rather than growers themselves established it.
Arguably, by not adopting a position aimed at encouraging growers to cease mulesing
has resulted in a loss of market opportunity. It was made clear at the meetings that
ventures aimed at accredited supplies of commercial volume of unmulesed wool
would be eagerly met with cooperative support. While mills acknowledged growers
would expect significant premiums for entering such agreements, no firm indications
would be offered until we entered a negotiation stage.
It should be noted that mills will be unlikely to pay significant price premiums for
unmulesed wool until consistent and uniform quantities of commercial volume are
supplied.
With regard to ASWGA members acceptance of a policy encouraging the cessation of
mulesing, the following table taken from 2015/16 data is noteworthy.
MULESING STATUS
NM CM PR NM+CM+PR
ASWGA Members Number of Bales 1,092 132 1,419 2,643
ASWGA Member Bales As a % of All Bales in
the ASWGA Data Set 32.3% 3.9% 41.9% 78.1%
AWEX Auction Data - % of All First Time
Offered Bales 8.1% 2.4% 19.0% 29.4%
The above table suggests bales from ASWGA members are about 4 times more likely
to be from unmulesed sheep, while bales from non members are about 3 times more
likely to be from sheep that are mulesed without the aid of pain relief.
This table indicates ASWGA members are more likely to be accepting of a policy on
mulesing than perhaps most other growers.
It is therefore suggested that ASWGA develop its own elevated policy on animal
welfare, particularly mulesing, and that it do so as a matter of urgency.

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5.3 Discussion - Providing Direction for the Superfine Wool Industry
While about 80 to % of Australian wool finds demand from the volume, generic
Indo/Asian markets, there remains buoyant demand from European markets aimed at
the luxury garment industry. The European market encapsulates the developing hi-
comfort knitwear product range through to worsted fabric manufacturing.
Supply for the Indo/Asian volume markets generally regards wool as a generic
commodity, while the European luxury garment industry appears more willing to
discern between high and low quality wool types. It is this area that presents
opportunities for income premiums.
In saying this, it is obvious China cannot be ignored as much of Australia’s superfine
woolclip is bought by Chinese mills, (in fact much of it ends up with European
manufacturers) however, in terms of market opportunities, European luxury product
ranges should receive our primary focus for the abovementioned reason.
A point of note with regard to pursuing the European based luxury end of the wool
trade is that this market provides a ‘plan B’ in the case of a downfall in demand from
China. A softening of the economy or wage boom in China cannot be ruled out, with
either case presenting a risk to Australia’s dominant wool buying customer. The run-
down in the Australian mining sector that once rode high on the back of mounting
Chinese demand is a lesson worth noting by the Australian wool industry.
The product range that presents most opportunities for superfine growers is the hi-
comfort knit wear market. This market is growing at a substantial rate. Further, these
product ranges typically have relatively high ratio of wool fibres, high product
turnover and higher ratio of retail $’s to growers due to short supply chain.
Trial work and isolated market initiatives indicate some opportunities may exist for
high crimp frequency wool in hi-comfort knitwear, although further trials are being
carried out to validate this potential.
The main wool criteria for luxury knitwear orders appears to be <19 micron with high
comfort factor (less prickle from reduction of coarse fibres), with a preference for
provenance of raw product combined with transparent supply chain.
Drawing on the points made above (incl Section 5.1), there appears no product
differential (expectation for price premiums) based on micron, although there is some
preference towards superfine type micron ranges. Further, differential based on crimp
frequency now appears to be losing relevance at the industry level.
Based on the above, ASWGA might therefore broaden its focus to include all
superfine wool production that aims to supply any luxury textile manufacturing. This
would allow coverage of the ‘traditional’ heartland of the ASWGA, but also allow
coverage of the emerging, and potentially lucrative knit wear trade. It is the latter that
arguably provides ASWGA with a sense of purpose where younger woolgrowers are
likely to find appeal.

- 15 -
Given both these markets encompass different forms of product differentiation, they
both present opportunities for price premiums in their own right, but to varying
degrees.
Overarching the opportunities with either market, however, is the element of
provenance. Grower initiated and maintained assurances of ethical and sustainable
production is the key to opening these doors of opportunity. Already, during meetings
with the Italian mills, it is clear ASWGA is seen to be in a perfect position to develop
and coordinate such initiatives.
The ASWGA has traditionally been regarded as a pinnacle organization, bonding
those growers who produce wool clips that exhibit the highest standards in wool
quality and presentation. Adopting the roles as outlined above, will effectively
position the association within the Australian wool industry where such principles can
best capitalise on emerging opportunities.
The statements above imply a fundamental shift to what ASWGA stands for, in that
the Association is defined less by wool type being produced by members, and more
towards standards in how the wool is produced and presented to market. Membership
would therefore, reflect a pursuit of excellence.
In recent years, ASWGA has recorded substantial success in its communication
initiatives such as grower conferences, emailed market and production updates and
information nights. It is suggested that such initiatives are more conducive to the core
objective of pursuing excellence rather than an association being defined by type of
wool produced.
While this report withdraws from suggesting the wording for a revised role and
definition of ‘superfine wool/merino’, it does suggest ASWGA consider amending
both, with the above comments in mind.

- 16 -
REFERENCES
Gregory, I. P. 1982a. Genetic studies of South Australian Merinos. III. Heritabilities
of various wool and body traits. Australian Journal of Agricultural Research
Marianna Greta1, Krzysztof Lewandowski, 2010. The Textile and Apparel Industry in
Italy: Current State and Challenges to Further Growth. Technical University of Łódź
Department of European Integration and International Marketing
Deloittes, 2014. Global powers of luxury goods 2014 - In the hands of the consumer.
Deloitte Touche Tohmatsu Limited.
Finocchiaro, Peter, 2010. Quality and ethics most important brand values to affluent
consumers. New York

- 17 -
PROJECT TEAM MEMBERS
Paul Vallely. Fullerton, NSW (Project Manager). Medium scale traditional superfine
woolgrower and owner of fibre analysis laboratories in Australia and UK. Previous
experience includes senior advisor to NSW State Premier, consortium manager for
Securcor UK and intelligence/investigative roles in NSW Police and Australian Army.
Lyndall Eeg, Yass, NSW. Provides secretarial support to project. Assists fellow team
member Paul Simons in day-to-day running of his merino operations. Previous
experience includes working in Corporate Communications, Woolworths Limited and
After Care Co-ordinator, Barnardos Australia. Graduated with BA BSW at Uni of
Sydney and Graduate Management Qualification from Uni of NSW.
Noel Henderson. Kyneton, Victoria. Owns/manages large scale traditional superfine
enterprise including stud operation. Also, Company Director with Probuild. Previous
experience includes Chief Operating Officer for Multiplex Group which included
‘The Grange’ merino operation in WA. Winner of 2015 ASWGA Fleece Competition.
Richard Keniry. Cumnock, NSW. Owns/manages large scale superfine
sheep/cropping operation. Also, leadership roles with sheep genetics programs.
Previous experience in product marketing, financial and business management
specialising in agricultural products. Member of ASWGA Council.
Danny Picker. Bigga, NSW. Owns/manages large scale traditional superfine
commercial and stud flock held in the family for six generations. The flock has earned
record number of 1PP bales in one clip (9 bales). Member of ASWGA Council.
Paul Simons. Yass, NSW. Owns large scale superfine and fine wool enterprises.
Previous experience includes Managing Director of Franklins' discount supermarket
chain 1979 - 87, and Executive Chairman, Woolworths Limited 1987 – 1995. Paul
was named BRW Businessman of the Year for 1989 and CEO of the Year for 1994.
Paul was more recently named by the Australian Financial Review as one of the
“…leaders, builders, pioneers and stirrers of Australian business since 1963 ...” (AFR
25 Nov 2013)

- 18 -
ACKNOWLEDGMENTS
The project team acknowledges the administrative support provided from ASWGA
Secretary, Ms Melissa Mulley, which became a crucial factor with the ‘all important’
passage of information.
The team also acknowledges the support of Dr Peter Morgan, ASWGA Public
Officer, whose input was vital to the supply volume analysis reports and his valuable
advice derived from his many years serving in senior and varied positions within the
Australian wool industry.
Also acknowledged is the professional support from Ian Ashman and John Billing of
the Australian Wool Testing Authority Ltd. Their response to our request for
curvature data was highly efficient and was crucial to our understanding of the supply
volumes for each type of superfine wool. This formed one of the platforms upon
which the project proceeded.

- 19 -
Annexure 1
AUSTRALIAN SUPERFINE WOOL GROWERS’
ASSOCIATION INC
ABN: 41 338 467 905 REG. NO. A0019005S
UNIT 9 / 42 - 46 VELLA DRIVE, SUNSHINE WEST VIC 3020, AUSTRALIA
T: 03 9311 0271 E: aswga@woolindustries.org
www.aswga.com
F: 03 9311 0138
ASWGA-16-050
The Volume of Wools of Different Fibre Curvature of <=18.5 Microns
Tested by AWTA Ltd – July 2015 to April 2016
JULY TO APRIL DATA
WEIGHT OF FLEECE WOOL AND SKIRTINGS OF <= 18.5 MICRONS (tonnes)
TESTED AT AWTA LTD
FIBRE CURVATURE YEAR 2012/13 to 2015/16
2012/13 2013/14 2014/15 2015/16 CHANGE % CHANGE
<70 deg/mm 41,150 50,417 47,961 52,344 +11,194 +27.2%
>=70 deg/mm 17,652 17,662 18,372 13,442 -4,210 -23.8%
>=75 deg/mm # 9,639 9,311 9,002 6,156 -3,483 -36.1%
>=80 deg/mm # 4,891 4,497 4,132 2,515 -2,376 -48.6%
>=85 deg/mm 2,115 1,959 1,622 901 -1,214 -57.4%
>=90 deg/mm # 828 763 596 270 -558 -67.4%
All Wool <= 18.5µ 58,802 68,079 66,332 65,786 +6,984 +11.9%
# The July to April data for =>75, 80 and 90 Degrees/mm averaged 93% of the total for the full 12 months period in 2012/13,
2013/14 and 2014/15.

- 20 -
127704 961685 4427813 12845487 23028139 41390828
156531 1658429 7092926 16209953 25802083 50919922
124914 1021156 5698811 15088448 25792320 47725649
Figure 1 - July to April Data
Percentage Changes in the Volumes of Different Fibre Curvature Values
-60.0
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
2012/13 to 2013/14 2013/14 to 2014/15 2014/15 to 2015/16
PercentageChange
ComparisonPeriods
Zero Change All Wool <=18.5µ >=75 deg/mm >=80 deg/mm >=90 deg/mm

- 21 -
Annexure 2 – Validation of Supply Data Analysis
From: Peter Morgan
To: Paul Vallely
Sent: Thursday, March 24, 2016 3:13 PM
Subject: RE: Analysis of supply volumes for s/f wool
Paul
As discussed, there are three areas that could lead to possible errors in the Year-to-Year
data:
1. Possible Changes in the LASERSCAN Measurement and/or Calibration Procedures
AWTA Technical Manager, David Crowe , advises that there has been no change in
the calibration or measurement procedures used by AWTA over the period of the analyses
(July 2012 to February 2016).
This is given additional support by examination of the data from the daily check
tests conducted by AWTA on each LASERSCAN.
David Crowe advises that the Fibre Curvature for each of the three Tops used for
these daily checks has moved down by 1 Degree/mm in the 12 months from March 2015 to
March 2016.
This is a very small movement; and is much less than the changes observed in the
analyses.
2. Possible Changes in the Data Extraction Processes used to Collate the Data at
AWTA
This has been checked by AWTA by re-extracting the data for February 2015 and
2016 from the AWTA data base.
Analysis of these data show no difference between the February data previously
extracted for 2015 and 2016
and the data for these two months when re-extracted in the third week of March
this year.
3. Possible Changes in the Procedures used by Peter Morgan to Calculate the Year-
to-Year Differences in Fibre Curvature
Re-analysis of the 2012/13 to the 2015/16 data showed no differences from when
they were first analysed.
Regards
Peter
Peter Morgan
Australian Council of Wool Exporters and Processors/Private Treaty Wool Merchants of
Australia
Unit 9
42 – 46 Vella Drive
Sunshine West Vic 3020

19 April 2016
Traditional Superfine Wool Flock Comparisons
Prepared by
Sandy McEachern
Holmes Sackett Pty Ltd
19/4/2016

2
Key Findings
Table 1: Key comparisons from benchmarked wool flocks.
Traditional
Fine Flocks
Non
Traditional
Fine Flocks
>18 µm Wool
Flocks
<18 µm Dual
Purpose Flocks
Average Adult Fibre
Diameter 17.2 17.3 18.9 17.8
Gross Margin ($/DSE) $23.76 $31.31 $34.18 $36.84
Net Profit ($/DSE) $4.14 $13.10 $14.30 $16.67
Net Profit ($/Ha/100mm) $5.97 $22.15 $21.08 $29.66
Cost of Production ($/kg
clean) $11.40 $9.03 $8.36 $7.34
Expenses ($/DSE) $36.53 $34.12 $37.37 $35.45
Wool Production (kg/DSE) 2.4 2.8 3.0 2.1
Sheep meat Production
(kg/DSE) 9.9 9.2 12.7 13.9
Average Adult Fleece
Weight 2.9 3.4 3.8 3.3
Weaning % 83% 82% 83% 85%
Wool Production
(kg/Ha/100mm) 3.8 4.9 5.2
Price Received ($/kg clean
sold) $12.88 $12.47 $11.45 $11.51
1. The data in table 1 comes from the Holmes Sackett Pty Ltd farm benchmarking data
and is the average of three years of data from the 2013 to 2015 financial years.
2. Wool flocks were broken up into ‘traditional fine’ wool flocks of less than 18µm, non-
traditional fine wool flocks of less than 18µm, all other wool flocks benchmarked and
dual purpose flocks where the average adult micron was less than 18µm.
3. Traditional fine wool flocks were those that placed significant emphasis on style (in
particular crimp frequency in their genetic selection decisions and considered
themselves traditional superfine wool growers. Non-traditional fine wool flocks were
those that were happy to forgo style in genetic selection decisions in pursuit of fibre
diameter and fleece weight alone. The ‘dual purpose’ flocks are those where fine wool
ewes are joined to ‘terminal’ or non-merino sires for the meat trade.

3
4. The most profitable flocks are the dual purpose flocks which are not self-replacing.
Most often these flocks occur in fine wool flocks with a portion of adult ewes joined
terminal sires.
5. The lease profitable flocks are the traditional superfine wool flocks. These flocks have
had lower gross margins per DSE, profits per DSE and profits per hectare per 100mm
of rainfall.
6. The lower profits stem from a higher ‘cost of production’ for wool for which they
have received and almost identical price as the non-traditional flocks.
7. The higher cost of production is a consequence of lower production not higher costs as
the expenses incurred per DSE are similar in all flocks.
8. Specifically, the lower production is as a consequence of lower wool production per
DSE. Sheep meat production is the same as other fine wool flocks which have
comparative profits to all other wool flocks.
9. The lower wool production per DSE is a direct consequence of lower fleece weights in
the sheep bred for ‘traditional’ style attributes.
Kind Regards,
SANDY McEACHERN
Director
Email: sandy@holmessackett.com.au
Mobile: 0427 326 367

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