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An ex post economic analysis of research 
and extension for the cover comb. 
A thesis presented in partial fulfilment of the 
requirements for the degree of Master of Applied Science 
in Agricultural Systems and Management 
at Massey University. 
Anne Elizabeth Dooley 
1997 
11 
ABSTRACT 
Agricultural research funding organisations, such as Wools of New Zealand (WONZ), 
are seeking ways to maximise benefits from their research portfolio. It has been 
suggested that this can be achieved by reducing investment in on-farm research and 
increasing investment in post-farm gate research on processing technology, product 
development and market research. However, little information exists to substantiate 
this point-of-view, and this gave rise to the research reported in this thesis. The 
hypotheses tested were first, that the return on the investment made by Wools of New 
Zealand in research on cover comb technology was positive and comparable to the 
return on other investment options, and second, that a model for the ex ante economic 
analysis of on-farm research could be developed using an ex post economic analysis of 
cover comb shearing technology research. 
The cover comb is an example of a discrete, relatively simple technology, whose 
development, research evaluation and extension have been reasonably well 
documented. Six experiments, funded jointly by Massey University and WONZ, were 
conducted with the cover comb at Massey University between 1989 and 1 995. Most 
extension costs were incurred by WONZ. The cover comb generates financial 
advantages to farmers by reducing sheep losses and possibly by conserving pasture 
when the feed supply is low. Uptake of the cover comb was estimated by surveying 
shearing contractors and Wool Production Officers, and from the pattern of cover 
comb sales. 
A spreadsheet model was developed to provide an ex post cost-benefit analysis of 
cover comb.shearing technology research and extension for the period 1 989 to 2020. 
This model included a sub-model of regional populations by class to estimate the 
number of sheep shorn by different methods, and a cost-benefit sub-model that 
described the temporal relationship between costs and benefits and calculated the 
returns. 
Ill 
The model estimated a 1330% internal rate of return (IRR), a $49.22 million net 
present value (NPV) and a 1 15: 1 benefit-cost ratio (BCR) for the cover comb research 
and extension investment at a 5% discount rate. The model outputs were sensitive to 
the post-shearing reduction in sheep losses associated with cover comb use (and 
therefore benefits per sheep) and the cover comb adoption rate. A sensitivity analysis 
indicated a 485% IRR, a $ 1 2.30 million NPV and a 25.3 : 1 BCR at a lower adoption 
rate (an increase in sheep shorn with a cover comb between 1989 and 2000 due to the 
research and extension, of 9.5% of all adult sheep in New Zealand, versus an increase 
of 12.9%), a lower net benefit per sheep ($0.23 per ewe shorn versus $0.47 per ewe 
shorn) and a 10% discount rate. Thus, even where conservative values for the cover 
comb technology were applied, a very favourable return on the investment made by 
WONZ was shown. The rapid uptake of the cover comb (over 30% of ewes shorn 
were shorn in 1995 with a cover comb, compared to 1 5% of ewes in 1989), and the 
size of the industry (33.7 million ewes in 1995) the technology is applied to 
contributed to these returns. 
The ex post cost-benefit analysis model could be adapted for ex ante evaluations of 
proposed on-farm wool industry research. This model would be useful for deciding 
which sheep production research should be funded. 
iv 
ACKNOWLEDGEMENTS 
First, I would like to thank Professor Warren Parker, Professor Stuart McCutcheon, 
Dr Ganesh Rauniyar and Associate Professor Stephen Morris for their advice, editing 
of the script, supervision and support. It was very much appreciated and contributed 
greatly to this study. I would also like to acknowledge Dr Chris Dake for his help and 
encouragement. 
Sincere thanks to all those who provided information for this study: the shearing 
contractors and the Wools of New Zealand extension officers for replying to the 
questionnaires; Dr Ken Geenty of Wools of New Zealand; Mr Roger Locke of 
Agrisales NZ Ltd and Mr Ian Wright of Heiniger NZ Ltd for providing sales 
information on the winter comb; and Mr Rex Williams of the New Zealand Meat and 
Wool Board Economic Service for providing statistical information. A special thanks 
to Mr Robin Kidd for assistance with letters and contacts, advice and technical 
information on winter comb shearing. 
Thank you also to Wools of New Zealand for the scholarship and for providing the 
funding for this project. 
I am particularly grateful to Rita and Peter Batley for information and ideas, and for 
their encouragement, support and hospitality. 
I would like to acknowledge the other postgraduate students in Agricultural and 
Horticultural Systems Management who contributed to making this an enjoyable year. 
Thanks also to Trena Hokianga and Denise Stewart for their cheerful assistance. 
Finally, I would like to thank my parents, especially my late mother for her inspiration. 
TABLE OF CONTENTS 
PAGE 
ABSTRACT ............................................................................................................ .ii 
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .... .iv 
TABLE OF CONTENTS ......................................................................................... v 
LIST OF TABLES .................................................................................................. xi 
LIST OF FIGURES ................................................ .............................................. xiii 
CHAPTER ONE: INTRODUCTION ........................................................ ....... ..... 1 
EVALUATION OF RESEARCH .................................................... ..................... ..  1 
Background ............................................................................................................ ..  1 
Types of Evaluation Used ........................................................................................ 4 
Practicalities of Research Evaluation ...................................................................... 6 
Cost-Benefit Analysis .............................................................................................  11 
Past Returns to Agricultural Research Investment .............................................. 14 
RESEARCH IMPACT AND TECHNOLOGY UPTAKE ................................ ... 17 
Research Aspects ........................................................................... ........................ 17 
Technology Uptake ................................................................................................ 18 
Size of the Industry ............ .................................................................................... 21 
Research Depreciation ........................................................................................... 21 
COVER COMB TECHNOLOGY ......... ............................................................... 22 
Description of the Cover Comb .............. ........................................................... .... 22 
Advantages of Cover Comb Use ........................................ .... ............................. ... 22 
Reduced Cold Stress .. . .............................................. .................. ....................... 23 
Reduced lLJsses ........ . ................... ..... .. ................ . ... ............. . ... ........ ............. .... 24 
Reduced Feed Intake ...... ....... ...... ........ ..... . . ...... .............. ........................... .... . . .. 25 
Reduction in Live Weight lLJss .................................................... ...... .............. .. 28 
Animal Welfare and Peace of Mind ..................... .............. .............. .. .... ... ......... 29 
Applications for Cover Comb Use . ........................................ ............... ..... .. . .. ....... 29 
Pre-lamb Shearing ....... . ........ .... ............ ...................... ....... ................. ....... ........ 29 
Alternative to Blade Shearing ............................................ ............................ .... 30 
Hogget and Lamb Shearing ............................... .... ......... ... ............... .... . ........ .... 31 
Alternatives to Cover Comb Use .......................................................................... .31 
MODELLING ........................................................................................................ 33 
Dermition of Modelling .......................................................................................... 33 
Model Development for Systems Simulation ........................................................ 33 
PURPOSE AND SCOPE OF THE STUDY .......................................................... 37 
Aims and Objectives .............................................................................................. 37 
Thesis Outline ........................................................................................................ 3 8 
CHAPTER TWO: COVER COMB TECHNOLOGY: THE COST OF 
RESEARCH, DEVELOPMENT AND EXTENSION . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . .  39 
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  39 
METHODS ............................................................................................................ 40 
Calculation of Research Trial Costs .................................. ................................... .40 
Full Costing of the Trials ...................................................................... ................. 40 
Use of the PGSF Model for Costing the Trials .................................................... .41 
PGSF Personnel Costs ....................................................................................... 41 
PGSF General Operating Costs ........................................................................ .41 
PGSF Premises Costs ............................................................ ............................ 42 
PGSF Equipment Depreciation ................................................. ........................ .42 
PGSF Overheads .................................................. ............................................. 42 
PGSF Extraordinary Costs ............................................................................... .43 
Summary for the PGSF Objective ............ .. ....................................................... .43 
Other Assumptions Made in Calculating Research Trial Costs ......................... .43 
Personnel Costs ................. ................................................................................ 43 
Shearing Costs ............. ............................................................................. ......... 44 
Data Collection and Analysis Costs ..................................... ....................... ...... .44 
Casual Labour Costs ......................................................................................... 44 
Chromium Capsule Costs ................................................................................... 44 
Feed Costs ......................................................................................................... 45 
Development Costs ................................................................................................ 45 
Extension Costs . .....................................................................................................  45 
Wools of New Zealand Extension Costs . ............................................................ .45 
RESULTS .............................................................................................................. 47 
Research Costs .......................................... ............................................................. 47 
Development Costs ................................................................................................ 49 
Extension Costs . ................ ..................................................................................... 50 
Total Costs ..... ........................................................................................................ 50 
DISCUSSION ........................................................................................................ 50 
Research Costs ....................................................................................................... 50 
Extension Activities ............................................................................................... 52 
SUMMARY ........................................................................................................... 53 
CHAPTER THREE: ASSESSING COVER COMB ADOPTION: FINDINGS 
FROM SURVEYS OF COVER COMB MANUFACTURERS, SHEARING 
CONTRACTORS AND WOOL PRODUCTION OFFICERS ............................ 54 
INTRODUCTION ................................................................................................. 54 
METHODS ............................................................................................................ 56 
Cover Comb Sales .................................................................................................. 56 
Shearing Contractors Survey ............................................... ................................. 56 
Wool Production Officers Survey ......................................................................... 57 
RESULTS AND DISCUSSION ............................................................................. 58 
Cover Comb Sales .................................................................................................. 58 
Survey Results ........................................................................................................ 61 
Timing of Shearing with a Cover Comb ............................................................. 61 
Numbers of Sheep Shorn with a Cover Comb and First Year of Adoption ........... 62 
Proportion of Sheep Shorn in Winter and Cover Comb Use ............................... 69 
Opinion Data ..................................................................................................... 71 
Opportunities for Further Use of a Cover Comb ................................................ 72 
Potential for Further Uptake of Cover Combs .................................................... 73 
Problems encouraging Farmers and Shearers to use a Cover Comb .................. 75 
Limitations on Further Use of the Cover Comb .................................................. 75 
General Comments on Cover Comb Uptake ....................................................... 76 
Other Reasons for Uptake of Cover Comb Technology ....................................... 78 
CONCLUSION ...................................................................................................... 79 
CHAPTER FOUR: MODEL DEVELOPMENT AND APPLICATIONS ......... 81 
INTRODUCTION ................................................................................................. 81 
METHODS ................................................................................................. 0 •••••••••• 83 
Sources of Input Information in the Investment Return Spreadsheet ... 0 •••••••••••• 85 
Research Costs ............................................................... 0 •••••••••••••••••••••••••••••••••• 86 
Development Costs ............. o ..  o ......................................................................... o.86 
Extension Costs ........................................................... 0 .. 0 0 0 0···················· ........... 86 
Technology Uptake •o··········· ........................... 0.0  •••••••••••••••••••••••••••••••••••••••••••••••• 86 
Calculation of Benefits .................................................. ···············o ·················o·· .0  •••  87 
Calculation of Investment Returns ...................... 0 •••••••••••••••••••••••••••••••••••••••••••••••• 91 
Calculation ofTechnology Uptakefor a Given Year .................................... 0 ••••• 92 
Calculation of Investment Returns ················o··················· o································95 
Sensitivity Analysis ................... ............................................ 0 ....................... 0 0 ..... 1 00 
Calculation of Spreadsheet Parameters .............................................................. 100 
Calculation of the Proportions of Sheep Shorn and in each Stock Class ........... 1 00 
Calculation of the Proportion of Sheep Shorn per Class ......................... 0 •••••••• 1 02 
Calculation of Numbers of Ewes Shorn and Ewe Shearings based on Opening 
Numbers .......................................................................................................... 1 04 
Calculation of Proportion of Ewes Shorn based on Ewe Shearings .................. 105 
SCENARIO ANALYSIS AND DISCUSSION ............. o •••••••••••••••••••• o ••••••••••••••••• 1 06 
Returns to Research and Extension ............. o •••••••••••••••••••••••••••••••••••••••••••••••••••••• 1 06 
Returns to Development, Research and Extension ............................................. 1 1 1  
General Discussion ............................................................................................... 1 13  
CONCLUSIONS ............................................................................... ................... 117  
CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS .............. 119  
REFERENCES .............................................................. . ..................................... 124 
APPENDICES ...................................................................................................... 132 
APPENDIX 1: DESCRIPTION OF THE RESEARCH TRIALS ...................... 132 
APPENDIX 11: COSTS ASSOCIATED WITH THE RESEARCH TRIALS ... 139 
APPENDIX Ill: CONVERSION OF DEVELOPMENT COSTS INTO 1996 
NZ$ ........................ ............................................................................................... 147 
APPENDIX IV: PUBLIC GOOD SCIENCE FUND (PGSF) SPREADSHEETS 
FOR THE SIX TRIALS ............................................ .......................................... 148 
APPENDIX V: COPIES OF THE QUESTIONNAIRES ................................... 173 
APPENDIX VI: NUMBER OF EWE AND HOGGET SHEARINGS WITH A 
COVER COMB BASED ON CONTRACTORS DATA .................................... 1 81 
APPENDIX VII: OFFICIAL ESTIMATES OF THE REGIONAL 
POPULATIONS OF SHEEP AND THE PERCENTAGE OF EWES, 
HOGGETS AND LAMBS SHORN WITH A COVER COMB ........................ 182 
APPENDIX VIII: SPREADSHEET TEMPLATES USED IN THE 
CALCULATION OF BENEFITS, SHEEP SHORN AND RESEARCH 
RETURNS ............................................................................................................ 1 83 
LIST OF TABLES 
TABLE PAGE 
2.1 Summary of cover comb research costs ($) for the six trials conducted at Massey 
University, based on original proposal costs (GST exclusive) . .......................... .47 
2.2 Summary of cover comb research costs for the six trials conducted at Massey 
University, both fully costed and excluding postgraduate (PG) costs (NZ$ 1996, 
GST exclusive) . ................................................................................................ 48 
2.3 Summary of annual timing of research costs for the six cover comb trials (NZ$ 
1996, GST exclusive) . ...................................................................................... 49 
3.1 Cover comb sales as a percentage of conventional comb sales based on the 
average of the 1985/86 - 1989/90 seasons (base figure of 1 00) and the number of 
scientific publications on cover comb research . ................................................. 58 
3.2 Percentages of ewe and hogget shearings with a cover comb in 1992/93 and 
1995/96, and year of first shearing with a cover comb. Contractors 1-7 are in the 
North Island and 8-12 are in the South Island . .................................................. 63 
3.3 Wool Production Officers' estimates of the regional populations of sheep and the 
percentage of ewes, hoggets and lambs shorn with a cover comb. (Numbers are in 
thousands) . ....................................................................................................... 66 
3.4 Percentage of clients asking for sheep to be shorn between May and September, 
and the percentage of these clients requesting that the sheep be shorn with a cover 
comb . ............................................................................................................... 69 
3.5 Shearing contractors beliefs about attributes of the cover comb technology. 
Figures in brackets show the response for each Island e.g. (6,1 ) means 6 North 
Island and 1 South Island contractor. ................................................................ 71 
4.1 Percentage of sheep in each class cover comb-shorn with, and without, research 
and extension . ................................................................................................... 87 
4.2 Benefits ($/sheep) for two scenarios of reductions in sheep losses due to cover 
comb- rather than conventional comb-shearing . ................................................. 90 
4.3 The proportional allocation of benefits ($/ewe) accruing to cover comb (CC) 
shearing from a reduction in losses, a change from blade to CC technology or a 
change in shearing policy . ................................................................................. 91 
4.4 Sheep shorn and in the different stock classes as a proportion of opening numbers 
(as at 1 July) based on 1990/91 to 1994/95 averages . ............................. 102 
4.5 The returns to research and extension for cover comb technology at the high 
benefit level. ................................................................................................... 1 06 
4.6 The returns to research and extension for cover comb technology at the low 
benefit level. ................................................................................................... 1 07 
4.7 The returns to research and extension on cover comb shearing of ewes at four 
adoption rates . ................................................................................................ 1 09 
4.8 The returns to research, development and extension of cover comb shearing at a 
5% discount rate, at both the high and a low benefit levels and including and 
excluding the extra $0.08 shearing cost. .......................................................... 112 
4.9 A summary of the returns to research calculated in five cost-benefit analysis 
studies. (Numbers in brackets indicate the number of studies where results are 
reported for more than one study) . .................................................................. 1 16  
5.1 The returns to research and extension on cover comb shearing technology. . .... 120 
Appendix VI: Number of ewe and hogget shearings with a cover comb based on 
contractors data . ............................................................................................. 181 
Appendix VII: Official estimates of the regional populations of sheep and the 
percentage of ewes, hoggets and lambs shorn with a cover comb . ................... 182 
LIST OF FIGURES 
FIGURE PAGE 
1.1 Basic steps in development of a model for systems simulation (Dent and 
Blackie, 1979) . .................................................................................................. 34 
3.1 Cover comb sales as a percentage of total comb sales (average of 1985/86 to 
1989/90 seasons expressed as a base figure of 100) . .......................................... 59 
4.1 Flow of information in the cover comb technology study . .................................. 84 
4.2 A map of sources and flow of information in the cover comb technology study . .  85