Module WOOL-422-522-08

Topic 01: Introduction

This subject covers the preparation and marketing of Australian wool clips. There are four main modules:

1. Clip preparation – theory and practice
2. Practical marketing – the choices and roles of pipeline players
3. Marketing and economic theory – macroeconomic factors affecting wool markets
4. Wool market dynamics – supply and demand for wool

By the end of this intoductory topic you should have:

• An overview of the unit and the Australian wool industry;
• An understanding of the need and requirements for the supply of high quality wool to the market ;and
• Knowledge of the main sectors and organisations that play a role in the industry.

Topic 02: Clip Preparation Research

This topic consists of three parts.

Part 1: Traditional classing and the impact of pre-sale testing

The procedures involved in classing methods are described and their efficacy in terms of preparing fleeces lines for marketing and subsequent processing are examined.

On completion of this section you should be able to explain:

• The structure of classed clips and the reasons for the lines made
• The relationships between objective measurement and subjective appraisal
• The results of objective measurement of classed lines prepared by subjective appraisal
• Indirect selection for fineness based on quality number
• Components of variation of fibre diameter and their impact on clip preparation.

Part 2: Influence of clip preparation methods

The sorting of skirted fleeces from the same mob on the basis of quality number is not effective in achieving worthwhile differences in fibre diameter, or in improving the variability of fibre diameter. Traditional procedures did improve the visual uniformity of classed lines for valuation purposes but the availability of presale test information reduced this requirement. Provided pre-sale test information was available, it was now permissible to place most of the skirted fleeces from a mob in a single line increasing lot size and reducing costs.

This section will provide:

• Understanding of the components of variation of fibre diameter and their significance in clip preparation and formation of mill consignments
• Familiarity with the outcomes of processing trials comparing Objective Clip Preparation with traditional procedures
• Understanding of the components of fibre/staple length variation and their significance in clip preparation and formation of mill consignments;
• Familiarity with the outcome of processing trials to determine the value of classing skirted fleeces from the same mob for staple length.

Part 3: Staple strength and general preparation procedures

This lecture examines the efficacy of classing fleeces on the basis of subjective estimates of staple strength or “tenderness”. The differences achieved in terms of measured staple strength and the processing consequences of these differences are examined.

This lecture will provide an understanding of:

• The components of variation of staple strength
• The relative significance of these components in clip preparation
• The differences in staple strength achieved by sorting fleeces on the basis of subjective estimates of strength
• The processing performance of sound and tender lines from the same mob
• The impact of the research results on clip preparation
• The relative proportions of the lower lines of a clip
• The measured characteristics of lower lines compared with fleece lines
• The processing performance of fleece lines, lower lines and mixtures of the two
• Conclusions to be drawn from processing trials on the preparation of lower lines and their separation from the fleece lines.

Topic 03: On Farm Fibre Measurement

New technology has enabled clip preparation to be more effective in producing lines that differ significantly in average fibre diameter. This is likely to be more profitable than producing one larger line for the fleeces from a mob of sheep whose average fibre diameter lies near the inflexion point of the curvilinear relationship between price and fibre diameter. The process is dependent upon the variation among fleeces, the accuracy of the in-shed measurement techniques and prevailing prices for different fibre diameter categories. The use of in-shed measurement as a tool for sheep selection offers considerable promise. The measurement of characteristics other than fibre diameter may be of some value in sheep selection but their influence on clip preparation appears to be marginal.

On completion of this topic you should be familiar with:

• The curvilinear nature of the price/diameter curve and its commercial significance
• The use of in-shed testing as a more effective tool than quality number for producing sale lots of different average fibre diameter
• The technical and commercial factors that influence the efficacy of in-shed testing
• OFFM as an aid to selection
• The prospects of utilising OFFM of other characteristics for clip preparation and sheep selection.

Topic 04: Shearing

This topic consists of two parts.

Part 1: Time, frequency and preparation for shearing

A particular time of shearing that improves one aspect of wool production or animal management often undesirably affects another factor. By the end of these lectures, you should appreciate that deciding on a time of shearing is seldom a clear-cut choice, but rather involves balancing the advantages and disadvantages of any particular time in a particular region.

On completion you should have an understanding of:

• How timing of shearing affects major wool production factors, including:
  • fleece weightfibre diameter
  • staple strength
  • staple length
  • vegetable matter and yield
• How timing of shearing affects sheep health and management, including:
  • effect on nutritional requirements of time of shearing
  • disease risk
  • aligning shearing time of young sheep with the main flock time
  • reproduction
• The relative importance of the above points and which should receive priority when deciding a shearing time
• The important aspects of preparation before shearing.

Part 2: Alternative shearing practices

This lecture describes the alternative shearing practices of Bioclip, ShearExpress and Robotic shearing that have been researched, developed or commercialised over recent years.

Upon completion you will have an understanding of alternative technologies for shearing sheep.

Topic 05: Wool Classing

This topic is covered by some practical notes on marketing options, methods and systems, and interpretation of documents when preparing Australian wool clips for sale, produced by the Gordon Institute (Hauge J. and Athol E. 1996, Certificate in Woolclassing, Gordon Institute of TAFE).

Topic 06: Type and Style

The value of wool is determined by both the measured attributes such as diameter, staple length and strength, position of break, vegetable matter content (and type) and yield along with a range of unmeasured or appraised attributes such as type and style and greasy colour. This topic provides a description of these two un-measured attributes, discusses some of the history associated with them, their use and background on research undertaken to objectively measure them.

On completion of this topic you should have an understanding of style and type when describing raw wool and their effect on processing and pricing.

Topic 07: Classing Systems

This topic looks at the development of the current woolclassing system in Australia and the philosophy of the code of practice that underpins the quality management aspects for such a system.

On completion you should have an understanding of:

• Different classing systems, the traditional (current) system, how it evolved and the reasons behind it
• The underlying basis of the current system along with the principles of blending different lots to meet specific requirements; and
• Other classing systems operating in other parts of the world.

Topic 08: Participants in the Wool Marketing Chain

This topic describes the wool marketing chain and details the role and nature of the various participants therein. It will start with an overall description followed by a more detailed analysis of each stage, the functions performed and the participants involved. Lastly the issues facing the wool marketing chain in the future will be briefly discussed.

On completion of this topic you should have:

• an understanding of the structure of the wool marketing chain
• an understanding of the roles played by the various participants in the chain
• an understanding of the different types of companies that fill these roles and how they operate
• familiarity with some of the dominant companies in each of these roles
• an understanding of the issues that challenge the structure of the supply chain and the possible future direction of changes.

Topic 09: Selling Systems

This topic describes the characteristics of the main transfer of ownership methods for wool in Australia. On completion topic you should understand:

• the major wool selling methods in Australia;
• the key reasons for the relative market share for each method;
• likely trends in selling mechanisms in the medium term;
• the major players in each selling method; and
• the wool description system called AWEX-ID.

Topic 10: Price Risk Management

This topic consists of two parts.

Part 1: The nature and management of price risk

This section describes the nature of price risk and how it is managed. It starts by looking at how price risk arises, why it exists and why it needs to be managed. The different attitudes to price risk are also considered in the context of the different types of participants that are typically exposed to market price fluctuations.

The presentation then goes on to examine the different types of price risk and describe how these are managed. The examples are drawn from a variety of markets including both commodity and financial markets. The management of price risk in the wool industry will be examined more specifically in Part 2.

On completion of Part 1 you should have an understanding of:

• Why price risk arises;
• The importance of price risk;
• The different types of approaches to price risk adopted by different types of market participants;
• The different types of price risk to which market participants may be exposed; and
• The tools and techniques that can be employed to manage price risk.

Part 2: Price risk management in the wool industry

This section takes the concepts of price risk management and examines how these apply in the wool industry. It starts by reviewing the nature of price risk in the wool industry followed by a description of the various risk management products that are available to participants in the supply chain. It then goes on to examine how these products are used by the various types of industry participants.

On completion of Lecture 2 you should have an understanding of:

• The nature and extent of price risk in the wool market
• The types of risk management products that exist
• How they can be grouped together based on particular features
• How they work
• The advantages and disadvantages of each; and
• How various market participants use risk management products.

Topic 11: Developments in Wool Marketing

This lecture describes the development of alternatives to the traditional marketing system. Such developments have largely been driven from the producer end of the marketing chain and thus are basically alternatives to either selling at auction or to a private buyer.The rationale for the development of alternatives to the traditional (auction / private buyer) system are examined along with the way in which the alternatives attempt to address perceived shortcomings. Specific examples of alternative marketing systems are used.

By the end you should have an understanding of:

• The rationale for the development of alternatives to the traditional auction system
• The advantages that are sought in the development of alternatives
• The manner in which such advantages have been pursued

Some specific examples of marketing system developments that have been tried.

Topic 12: Wool Growing as a Business

This topic consists of three parts.

Part 1: Overview of wool growing businesses

This section provides an introduction to the concept of wool growing as a ‘business’ and considers the interaction between the social (people), biological (farming) and business management aspects of the wool enterprise. Parts 2 and 3 will examine the issues introduced here in further detail.

On completion of Part 1 you should have developed an understanding of:

• the interaction between the social (people), biological (farming) and business management aspects of wool growing;
• the different ‘views’ individuals may bring to, and work through, in the farming enterprise; and
• the importance of considering these views to ensure effective communication and innovation within the wool industry.

Part 2: Profitability and management levers for the wool growing business

This section further develops the material introduced in Part 1 and considers the wool growing business as a production unit. It examines the characteristics of high-performing wool production businesses and considers the impact of a shift/diversification into meat and wool production. It also considers the impact of region on production and the nature of the production unit.

By the end you should have developed an understanding of:

• the profitability and management levers for a wool growing business;
• the differential characteristics of high and low performing wool growing businesses; and
• the impact of region on the production unit.

Part 3: Techniques to improve marketing responsiveness

In this section some of the links between the on- and post-farm sectors in the wool industry are introduced. As such, the content moves into the somewhat ‘grey’ space between agricultural production (science) and agricultural marketing. The agricultural marketing aspects are further developed in Topics 11 and 14. This section considers how the on-farm sector can become more market responsive and what might be some of the impediments to such a change. It also considers the role of technology in facilitating a new market-oriented outlook and responsiveness.

On completion you should have developed an understanding of:

• Opportunities for and impediments to, market responsive wool growing businesses
• Industrial vs biological systems: can wool production respond to the market?

Role of technology in assisting market oriented wool production.

Topic 13:  Wool Price Determination: Macroeconomic and External Linkage

Australian woolgrowers’ incomes are influenced by developments in the world and Australian economies within which they exist and within which they have to work. The links between the macroeconomic and external forces and growers’ incomes are not necessarily straightforward, not the least because the effects do not always work in a single direction.

On completion of this topic you should be able to:

• understand economic developments in the wool market;
• be able to evaluate the many domestic and foreign developments such as exchange rate fluctuations, changes in government policies, etc that affect the wool market; and
• be able to make strategic marketing decisions based on analytical evaluations of the market.

Topic 14: Marketing Principles

This topic consists of three parts.

Part 1: The application of marketing principles to the wool industry

This section provides an introduction to marketing, both general principles and their application to the wool industry. It examines the definition of product and commodity and considers the implication of these for marketing system choice and development. The wool supply chain is also introduced.

On completion you should have developed an understanding of:

• Basic marketing concepts;
• The definitions of products and commodities and the way in which our understanding of these should guide marketing system choice; and
• The basic structure and function of the apparel wool supply chain.

Part 2: Supply chains

This section builds on the fundamental principles presented in Part 1 and develops the concept of the supply chain more fully. Specifically, this section looks at the role of supply chains in all their forms, and our understanding of how they function in both the wool industry and other agri-industry. It looks at how managed supply chain approaches differ from other types of marketing relationships and how supply chains are formed, maintained and managed. It also looks at the factors contributing to chain success and the role of communication within the chain.

On completion of Part 2 you should have developed an understanding of:

• Supply chains and their function;
• The concept of managed supply chain approaches to marketing (supply chain management – ‘SCM’);
• The roles of the various ‘actors’ within a chain;
• The role and importance of communication within a chain;
• How chains are formed, maintained and managed; and
• How supply chains work to build value.

Part 3: Competitive position of wool as a textile fibre

This section builds on the general and fundamental principles presented in Part 2 with respect to both the way in which supply chain actors interact, and the concept of managed supply chain approaches. As mentioned in Part 2, it is important to remember that supply chains are simply structures, while supply chain management is a philosophy or approach to deal with the complexities and challenges facing modern business.

This section examines the specific characteristics of wool and how these relate to the raw wool consumer, be they a processing customer or apparel purchaser. It considers the current description of wool and the opportunities for improved description in the future. It also considers the competitive position of wool compared to other textile fibres and how the market share of wool has declined over the last 40-50 years. Finally it looks to the future and considers where wool may be 10-20 years from now.

On completion of Part 3 you should have developed an understanding of:

• Competitive position of wool as a textile fibre;
• Raw wool and its complexities;
• Wool’s decline in textile market share;
• Role and impact of raw wool description;
• Opportunities for improved description in the future; and
• Product opportunities for wool in the future.

Topic 15: Global View of the Apparel Market

This topic consists of two parts.

Part 1: The global textile industry

This section describes the global textile industry, where apparel fits in and how change is a normal feature of the industry. The change is driven by new technology and changing economic circumstances between countries. References and reading material provided allow further study of the fibre, processing and distribution industries that combine to allow fibres to be sold as apparel.

On completion you should have an understanding of the:

• Outline, size and complexity of the fibre, textile and apparel markets;
• The possible end-uses for textiles;
• Key drivers of demand for textiles; and
• Major changes taking place in the textile industry and the consequent outcome.

Part 2: Where does wool fit into the global apparel market?

This section describes the relationship of the wool industry to the fibres and textile markets. The wool fibre market is currently in the throws of change that were stimulated by technological development during the past three decades and the latest greasy stockpile liquidation.

On completion you should have an understanding of:

• the industry structure that allows wool to enter and participate in the textile industry;
• which categories of wool are used for the different apparel and furnishing categories;
• the geographic flow of wool around the world; and
• the key driver of change in the wool industry.

Topic 16: Wool Supply Overview

This topic outlines the key components of wool supply on an Australian and global wool basis.

On completion you should have an understanding of:

• The two key components of wool supply: production and stocks;
• Recent trends in production and stocks;
• The major factors impacting on wool supply;
• Quality differences between Australia and other wool exporting countries; and
• Likely trends in future wool supply.

Topic 17: Demand for Australian Wool

This topic describes the wool pipeline, its decision drivers from consumer to woolgrower and the decision cycle to fill demand by processors in the pipeline. Australia is the world’s major supplier of apparel wool and the wool textile pipeline is long and complex.

The topic is divided into two major sections:

1. consumer profiles including spending patterns, market segmentation and product requirements; and
2. processor decision activities.

On completion of this topic you should be able to describe:

• The wool textile pipeline; and
• How decisions are made throughout that pipeline.

Topic 18: The Markets for Australian Wool

The demand for Australian wool ultimately derives from the demand for wool clothing at retail (e.g. suits, coats, sweaters), which in turn is a function of prices, consumer incomes, population size, tastes and preferences and promotion. Rich consumers in the developed markets overseas with high discretionary incomes (e.g. the US and EU) are still the major consumers of Australian wool, but consumers in the populous developing world (especially China and India) offer significant potential growth.

On completion of this topic you should:

• Have a good understanding of the drivers of demand for Australian wool according to individual micron and product segments.
• Be able to discuss the regional trends in the demand for Australian from export, intermediate processing to final retail stage.

Topic 19: Product Promotion

This topic consists of three parts.

Part 1: The history of wool promotion

This section provides an introduction to wool promotion. It examines the history of wool promotion, particularly the use, role and evolution of the ‘Woolmark’ and the structures which have supported the brand over time. It also considers the role of generic and targeted promotion strategies.

By the end you should have developed an understanding of:

• The history and evolution of wool promotion to the current day;
• Generic promotion and the role of the IWS and Woolmark;
• The customer as the ‘target’ of promotion; and
• Approaches to co-promotion of wool.

Part 2: The influence of technology on promotion

This section builds on the approaches to promotion described in Part 1 and looks at the influence of technology on promotion. Technology influences both the wool industry and competing fibres and can impact through generating improved production efficiencies, better information flow and a range of other mechanisms. As technology continues to evolve, its impact on our industry will continue to be far-reaching.

By the end you should have developed an understanding of:

• The role of technology in product promotion;
• The Impacts of technology on working with a complex supply chain;
• Technology and competing fibres; and
• On-farm and post-farm technology, can both contribute to product promotion?

Part 3: Future product promotion models

This section completes the series on product promotion. Through the series we have looked at the history of wool promotion and its evolution. We have examined the nature of generic and targeted promotion along with the use of technology to support promotion and its role in the development of new products with enhanced consumer appeal. This lecture looks to the future in terms of the consumer, the models used for promotion, and the context in which wool is used. It also examines the role of production regions as marketing concepts in themselves.

By the end you should have developed an understanding of:

• Future models for product promotion;
• The consumer of the future – what will they be like?;
• Wool as a textile fibre in the future and other uses for wool; and
• Grower marketing groups and production regions as a marketing concept for wool.

Topic 20: Value and Use of Wool

This topic consists of two parts.

Part 1: Textile properties of wool and other fibres

This section outlines the properties of wool and its competitor fibres that are of value in textile processing and products. Some of the definitions have already been covered in early topics but here we look at them more specifically in terms of processing outcomes.

On completion you should be able to:

• State the properties of wool that are of major textile significance;
• Explain why each is important in processing and in products;
• Describe the major manmade fibres that are in competition with, or complementary with, wool; their advantages and disadvantages; and
• Outline why and how blending is used in the textile industry (both in wool blends and combining wool with other fibres).

Part 2: Wool textile processing and manufacturing

This section outlines the principle steps in converting wool into consumer products via the three main spinning routes and principle methods of wool fabric formation.

On completion of Part 2 you should be able to:

• Describe the main steps involved in converting wool into yarn;
• Compare the features of the three processing routes: woollen, worsted and semiworsted;
• Explain the fibre requirements for processing via these routes;
• Describe the basic features and operating principles of the key machines used in these routes;
• Compare the characteristics of the yarns produced by these routes; and
• Describe in simple terms the processes of knitting, weaving and tufting and the products manufactured by them.

Topic 21: Overview

This topic reviews and summarises the 20 previous topics covered in Clip Preparation and Wool Marketing.