Is the Australian wool industry efficient at converting wool into value

IF 0.3 Q4 AGRICULTURAL ECONOMICS & POLICY
E. Fleming, D. Cottle
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Abstract

The marketing strategies of agricultural producers have become increasingly focussed on the sale of differentiated products to intermediary buyers rather than the sale of homogeneous commodities directly to retailers. The wool value chain in Australia fits the description of differentiated products being sold by wool producers to agribusiness firms that are intermediaries in the chain. The attributes of wool that are the source of this differentiation are used by firms to add value to their operations, reflected in higher retail prices paid for wool products. We measure the overall efficiency with which wool is converted into value across different processing routes and end products in the Australian wool value chain and decompose it into its technical, scale and mix efficiency components. We find that wool price changes significantly with a change in fibre diameter, staple length and staple strength and employ a flexible functional form to capture the relations between these wool attributes and lot value. Results show that considerable scope exists to increase the value of most sale lots, and indicate that the overall efficiency in extracting value is lower for wool supplied to processes that produce high-value wool garments. We then ascertain that various factors related to wool production and product characteristics significantly influence the level of technical efficiency. The mix of the three key attributes in wool lots was found not to be a major factor influencing overall efficiency whereas scale efficiency scores (which we measure as returns to wool attributes) were clearly much lower than those for technical and mix efficiency scores, a function of strongly increasing returns to wool lots as the levels of attributes increase. We test propositions about the skewness of distributions of efficiency scores in translating wool attributes into value. Most distributions of overall efficiency scores are positively skewed for production processes paying high prices for wool, and differences in overall efficiency were observed across selling centres. Prima facie, the results provide a strong case for wool producers to move to higher value levels of wool attributes by producing finer, stronger and longer wool fibres – especially the former. But such a strategy may not be an optimal one for producers to follow because the investments they make to implement such a strategy may entail high costs and take a long period to fruition that would lead to a heavy discounting of future benefits. A full benefit-cost analysis would be needed of any investments to raise the levels of wool attributes and otherwise improve wool quality at the farm level.
澳大利亚羊毛工业在将羊毛转化为价值方面效率高吗
农业生产者的营销策略越来越侧重于向中间买家销售差异化产品,而不是直接向零售商销售同质商品。澳大利亚的羊毛价值链符合羊毛生产商向农业综合企业销售差异化产品的描述,而农业综合企业是价值链中的中间商。羊毛的属性是这种差异的来源,企业利用羊毛的属性为其业务增加价值,这反映在羊毛产品支付的较高零售价格上。我们衡量了澳大利亚羊毛价值链中不同加工路线和最终产品中羊毛转化为价值的整体效率,并将其分解为技术、规模和混合效率组成部分。我们发现羊毛价格随着纤维直径、短纤维长度和短纤维强度的变化而显著变化,并采用一种灵活的功能形式来捕捉这些羊毛属性与批次价值之间的关系。结果表明,大多数销售批次存在相当大的增值空间,并表明为生产高价值羊毛服装的过程提供的羊毛提取价值的总体效率较低。然后,我们确定了与羊毛生产和产品特性相关的各种因素显著影响技术效率水平。羊毛批次中三个关键属性的混合被发现不是影响整体效率的主要因素,而规模效率得分(我们以羊毛属性的回报来衡量)明显低于技术和混合效率得分,技术和混合效率得分是随着属性水平的增加而强劲增加羊毛批次回报的函数。我们测试了在将羊毛属性转化为价值时效率分数分布的偏度。总体效率得分的大多数分布都正向倾斜,因为生产过程为羊毛支付了高昂的价格,并且在各个销售中心观察到总体效率的差异。从表面上看,研究结果为羊毛生产商提供了一个强有力的理由,即通过生产更细、更强、更长的羊毛纤维,向更高价值水平的羊毛属性转移——尤其是前者。但对于生产商来说,这样的策略可能不是最理想的,因为他们为实施这样的策略而进行的投资可能需要高昂的成本,并且需要很长时间才能取得成果,这将导致未来收益的严重折扣。在农场层面,提高羊毛属性水平和提高羊毛质量的任何投资都需要进行全面的收益-成本分析。
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来源期刊
Australasian Agribusiness Review
Australasian Agribusiness Review AGRICULTURAL ECONOMICS & POLICY-
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