One of the nation's foundation industries has hit a new low with the axing of scientific efforts to boost market prospects. Geoff Cumming looks at the wool trade's ravelled lines
The rest of the world may think of New Zealand as one big sheep farm, but even Aucklanders know the image is outdated - it's a long time since growing wool was either lucrative or a vital cog in our economy.
But AgResearch's decision to cull its wools and textiles division this week and axe 35 scientists should nevertheless make townies look up from their lattes long enough to ask what's going down on the farm.
Our green hills remain home to 32 million sheep and wool exports, while in freefall, still earn nearly $800 million a year, just behind the wine industry.
The human flock - particularly fans of high-fashion merino tops - might therefore be forgiven for thinking continued research was crucial to helping wool bounce back from troubled times.
In recent years, AgResearch scientists have unveiled innovations from machine-washable woollen shirts and trousers to woollen sleepwear that doesn't itch.
AgResearch even made an eye-catching debut at NZ Fashion Week in 2007, where the likes of Anna Stretton and Cybele sent out garments made from superfine merino, windproof fleece and novel knit jacketing.
The star attraction was a mannequin wearing AgResearch's stab-resistant vest, cunningly disguised with woollen fibre.
But finding commercial success for such breakthroughs has largely eluded AgResearch, not helped by the global downturn and the textile industry's fickle fortunes.
When AgResearch confirmed it was shedding 35 staff and virtually ceasing wool biology research, suspicion immediately fell on Government funding constraints.
It turns out farmers brought it on themselves. In voting last year to axe the woolgrowers levy used partly to fund AgResearch's work, it seems sheep farmers left the agency with little choice.
"It was the straw which broke the camel's back," says AgResearch chairman Sam Robinson. While a crown research institute, AgResearch is required to operate as a commercial business. Robinson, a Hawkes Bay sheep farmer, says the agency's wools and textiles research has been under-funded for many years.
Tellingly, he says the agency did not approach the Government, which sets its Budget next month, for help to keep the research going. "I don't think that's the Government's role - it's the industry's role."
Not that the Key Government should be absolved of all responsibility. While paying lip service to the importance of research and development funding, some observers say its axing of the previous administration's Fast Forward funding scheme and slow introduction of its replacement Primary Growth Partnership further reduced AgResearch's options.
Industry players say the move will mean a loss of capability which will be felt for years to come.
"Once capability has gone it's always hard to get it back again," says Meat and Wool NZ chairman Mike Petersen.
"They will go and apply their skills in other areas of research and may not come back again. AgResearch had probably the last remaining capability in the world for fundamental wool science research rather than commercially-focused research."
For some farmers, the decision is proof that the Government and its agricultural science agency have given up on the wool industry.
At risk of sounding like shepherds crying wolf, they predict sheep numbers will continue to decline and conversions to dairying and timber will accelerate, until sheep farming is reduced to small high country pockets.
That could be damaging both environmentally and economically.
Sheep farmer Cliff Heath, who chairs investment company Wool Equities, fears the Government is pinning too much faith on dairying.
"Given current market conditions and the Government's attitude I believe we will see the sheep industry decline at around 5 per cent a year, compounding, for the forseeable future," says Heath.
"This will bring the advance of more dairy cows in places people don't want to see them.
"The question for New Zealanders is 'do we want New Zealand to be one big dairy farm?' If we don't, there need to be some active initiatives on the part of the Government to assist the wool and textiles industry."
Clothing label Icebreaker's international success in turning merino wool into a fashion must-have suggests wool can compete against synthetic clothing, particularly as consumer demand soars for sustainable natural products.
Similarly, the global woollen carpet and rug industries could take more wool than we could ever produce, if the price was right. Wool has untapped potential in insulation, acoustics, industrial and even surgical uses.
Industry insiders say fundamental science research still holds the key to fulfilling this potential, through invention and innovation. But AgResearch's failure to gain a commercial return on its breakthroughs - and an inability to solve problems such as colour-fastness and insect resistance - saw farmers run out of patience.
Most agree the decision to axe the levy was inevitable after decades of depressed prices, negative returns, failed marketing strategies and revival attempts and the industry's painful unravelling into division and dissent.
Frustratingly, industry players seem to know where the solutions lie - identifying products consumers want, more R and D, a shorter supply chain, better marketing - but the sector is in such a tangled mess it doesn't know how to get there.
Just working out who speaks for the industry reads like a Monty Python sketch.
There's Meat and Wool, Wool Equities, Wool Partners International, the National Council of NZ Wool Interests, the NZ Council of Wool Exporters, the Federation of NZ Wool Merchants NZ Wool Services International, and so on.
Grower-led marketing company Wool Partners is in competition with Elders Primary Wool, each promoting carpet brands offshore - Laneve and Just Shorn - which lack an obvious New Zealand connection.
Some argue that's not a problem; a Fonterra-like farm gate-to-market approach sends shudders through the industry.
Perhaps the saddest commentary on the sector's plight is that Meat and Wool NZ is about to rebrand itself Beef and Lamb NZ.
Waipukurau farmer Robin Hilson led last year's levy revolt but he is unrepentant about the fallout. "The removal of the levy sped up something that was already happening," says Hilson.
"Nobody likes people being put off but you have to look at the quality of the work. The research we fund is meant to give us a return but the view of many farmers was that the only thing coming out was lots of glossies [promotion material]."
Hilson fears wool could go the same way as the linen flax industry more than a century ago. He says the sector needs "blue sky" research to find out what markets and consumers want and then engage world-leading textile scientists to "redefine what wool is".
"Wool needs to be seen as a component and the important thing is it's not called wool," says Hilson.
"We need to produce fabric which breathes and adjusts its temperature, which holds its colour and shape when washed, which is quick drying. These things are not impossible - it's what has to be done if farmers are going to have confidence to increase sheep numbers and get a return."
He says this effort needs to be financed by the Government.
"The alternative is that the demise of wool growing will accelerate."
Stephen Fookes, of the National Council of NZ Wool Interests, agrees the Government has a responsibility, given the sector's importance to the economy.
Fookes fears the loss of AgResearch's textiles capability will be felt in the medium to long term. "In five years time we will be saying 'where are the new developments' because we got rid of all the scientists."
Wool Partners chief executive Iain Abercrombie says not all is lost, with a consortium of industry partners funding research with commercial potential. "We are targeting research which is going to give us a competitive advantage, such as debunking claims about wool carpets and asthma."
But Fookes says that leaves a gap in fundamental science research which the private sector won't risk capital on. "We don't only lose that, we lose the development of people who are going to move on and take products to another level in the commercial environment."
A well-balanced, industry-wide structure is needed to identify market gaps and projects, co-ordinate funding and contract the work, Fookes says.
"We need to get the industry going so it can actually fund [research]."
Wool Equities' Cliff Heath says helping the wool sector is an obvious way for the Government to grow the economy, offering better short to medium-term prospects than mining or carbon farming (planting trees). Heath has 9000 ewes on 1415ha in the northern Manawatu.
"There's a trigger point where planting the whole place in trees becomes more profitable than sheep. It's good for me as the owner but it's seriously bad for New Zealand. This farm contributes nearly $3 million in GDP; as soon as it's planted in trees that's gone and a freezing worker loses his job and the staff here are no longer required ..."
Heath says the cold northern winter exposed the shortcomings of synthetic fabrics compared to wool but high fashion garments are not big enough as a sector to reverse the industry's fortunes.
He sees substantial potential in woollen carpets.
"It doesn't need much of a nudge to make a dramatic difference, providing we stop trying to compete at the bottom end of the market. The opportunities exist, it's a matter of being able to capitalise on them.
"A decision like this indicates that the Government through its agency has decided that wool doesn't have a future. Wool is no longer a key block in the economy."
Meat and Wool's Mike Petersen firmly rejects the idea that wool is a dying industry.
"It's still only just behind the wine industry. There are huge opportunities out there. We don't need to reinvent wool as a fibre, we just need much better marketing and much better stories."
Petersen says the key is to get returns right for farmers. "The way we take wool to market is the issue."
After growers dumped the levy, Agriculture Minister David Carter set up a taskforce which recommended a new marketing strategy for the industry. Last month, Carter appointed former Treasury secretary Murray Horn to try to unite the troubled sector.
Carter also dismisses charges that wool is in terminal decline and acknowledges the need to assist research and development funding. He says AgResearch's decision and the feared loss of industry expertise adds urgency to Horn's work and he expects rapid progress.
"I'm confident within a few months we will have some results which we can take back to farmers and show it is not a sunset industry.
"We've got to get farmers again believing in their product then consider what research is required.
"I think it won't be long before we can make some announcements."
Woolgrowers might claim they've heard it all before.
* Sheep numbers have fallen from around 70 million in 1982/83 to 32.4 million last year.
* Wool export returns have fallen from $1.24 billion in 1995/96 to $777 million last year.
* Sheep farmers' earnings from wool fell from around 40 per cent of farm income in the mid-1980s to 10 per cent last year.
* Wool auction prices have fallen in real terms from $5.38/kg in 1990/91 to $3.29/kg last year.
SOURCE: MEAT AND WOOL NZBy Geoff Cumming Email Geoff