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by S J Chaffey & B A McGregor

June 2004

RIRDC Publication No 04/097 RIRDC Project No 205A

Executive Summary
This study has been approached from the perspective that making the cashmere enterprise more attractive to potential investors is a critical pathway to growth in the industry. Growth is defined as more volumes of cashmere moving through Australian supply chains.

Growth in the cashmere industry could begin to occur rapidly if there was a doubling in the price of cashmere. While this may be possible over the long term, given historic changes in demand in the textile fashion industry, it is the type of growth that is likely to attract opportunists into the cashmere industry who are the first to abandon it when prices shift down again. This paper suggests the industry has the opportunity to better present its information and control the decision making process so that it can attract people who are likely to make a significant contribution to the medium and long term success of the industry.

Substantial growth in cashmere production could come from either more people establishing large-scale enterprises on highly compatible farm systems in highly suitable geographical areas in the Australian landscape and / or harvesting the cashmere from feral goats.

Capturing the cashmere that exists on the backs of feral goats currently being harvested across Australia, if feasible, could produce from 3,000 to 8,000 kilograms to a value A$200,000 to A$600,000.

The product could be captured at either the farm gate or the abattoir.

Attracting 10 people each year for the next ten years with a high compatibility rating for cashmere production and who are willing and capable of building and sustaining a breeding female population of 300 or more animals, is likely to contribute 10,000 kilograms of cashmere and A$900,000 to the industry by 2013. These people will judge the cashmere enterprise based on its profitability and the extent of satisfaction they derive from the enterprise. Appealing to other motives will fail.

These people would make their investment decision based on the compatibility of the enterprise to their farm system, the technical, financial and market feasibility of the enterprise and its comparative advantage with other possible courses of action. They are likely to be sceptical of information coming from within the industry that is not sufficiently supported by fact. Despite this they will form their opinions based on their own experiences, opinions of other farmers they respect and people that they regard as experts.

They will be particularly sceptical of what they might regard as a fringe industry run by people who do not farm in ways similar to them or live in environments in which they farm. Language or media that is not consistent with the language they are familiar with from other mainstream industries such as wool, lamb and beef will not positively influence their opinions.

The cashmere industry has inefficiencies that make it less appealing to some people. Slow payment for the cashmere product, a supply chain that appears too long and what appears to be a marginally profitable proposition on today’s dollars make the task of convincing investment in cashmere enterprise a difficult one.

The cashmere industry has a wide range of information generated over many years ranging from introductory material to scientific reports. The current information packages offered by the industry to people inquiring about the enterprise are not sufficient for decision-making by people operating commercially large-scale farm businesses. The information assumes people are capable and willing to invest the time in finding sufficient information to make informed decisions about the enterprise.

Identifying the key features of the enterprise, discovering benefits and working through the facts and fictions of the many objections they encounter about the goats is a time consuming task that many people would not embark upon.

 The following specific recommendations are made.
 

• Gather as much existing information on the industry and repackage it to enable people external to the industry to assess their compatibility to the cashmere enterprise quickly.
• Establish a financial feasibility model. Build in current and future benchmarking and financial data that exists in the industry that then allows people internal and external to the industry to test and discover the enterprise feasibility under a wide range of sensitivities and scenarios in a safe, easy to use learning environment.
• Implement a communication plan that uses existing information and people in the industry to develop a specific features, advantages and benefits package focused upon the wants and needs expressed by people unrelated to the cashmere industry as outlined in this report.
• Control more steps of the investment decision-making process. This recommendation follows on from Michael (1999) where the reduction of ‘search costs’ and ‘thinking costs’ and the ‘reduction of time obsolescence costs’ were a benefit of cashmere industry conferences in conjunction with standard extension methods. That is, industry conferences represent a greater control of the information dissemination process.
• Determine the feasibility of harvesting cashmere from feral goats.


RIRDC and the Australian Cashmere Growers Association are strongly encouraged to invest in the development of this commercial vision. Once areas can be addressed and the medium term feasibility of the enterprise is demonstrated then the industry could work toward increasing its visibility to the broader rural community with greater confidence.

The industry will need to work toward establishing an efficient supply chain through to the dehairing facility in order to build people’s confidence to invest in the industry.
 

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Last updated: 14 June 2004
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