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Category: Wool / Trade

Wool back in fashion, pushing prices towards record highs

Wednesday, 18 Jan 2017 12:35:42 | Stephen Letts

Australia may not ride on the sheep's back anymore, but the wool boom is bigger now than when it was. (Landline)

Australia's wool growers are experiencing the best conditions in decades as prices surge towards record highs on the back of a solid increase in demand.

The broadest measure of wool prices, the Eastern Market Indicator, started the week's trading just 6 cents shy of the record 1436 cents per kilogram reached in June 2011.

Industry analysts predict the current price momentum is more sustainable than the spike of five years ago, which was driven by shortages caused by the industry's slump during the global financial crisis.

Australian Council of Wool Exporters and Processors executive director Dr Peter Morgan said the current price rise was backed by solid and ongoing demand in China.

"It looks like supply and demand are in reasonable balance, if anything demand is slightly stronger," Dr Morgan said.

Many of the finer lines of wool have risen by around 20 per cent since July last year and are already at record highs.

However, the moves in coarser wool have been more muted, with the margin between fine and coarse cross-bred wool expanding from around 10 to 25 per cent over the past six months.

Dr Morgan said it is a similar story in Western Australia where wool is auctioned out of Fremantle.

Better conditions than 1951 wool boom says grower

Woolgrower Peter Small from Victoria's western district said the past two or three years are the best he can remember in the industry.

Woolgrower Peter Small Photo: Woolgrower Peter Small says conditions now are even better than the 1951 wool boom. (Supplied: Terry Sim, Sheep Central)

"I'm 76 years old and I remember the '51 wool boom. Everyone up at Birchip was buying new Fords, but it was very short and lasted only six months," Mr Small said.

Mr Small runs 6,000 merino ewes at his property at Gritjurk near Coleraine. He is also in the unusual position of being a processor, dispatching wool to a mill and factory in China.

"Back in 2010 when wool was $10 (a kilogram) I made a prediction the price would double before then end of the decade, and I'm sticking to it," he said.

"We're on the way to a merino ewe cutting $60 of wool, that's starting to be serious money."

The sidelines to the wool game, such as lambs around $105, are also helping swell farm incomes.

Massive investment in Chinese processing

Mr Small is a big believer in the ongoing strength of China's appetite for wool, having just returned from another trip to Shanghai to visit his processing operations.

China is the biggest buyer of wool, purchasing around 75 per cent of the clip.

The Chinese expansion has more than filled the void of Italian buyers, who fell from around a 20 per cent market share to less than 5 per cent, having failed to recover from the GFC-inspired industry collapse.

India's massive textiles industry is growing in importance as well, and now buys almost 10 per cent of Australia's wool.

"I've been watching a massive investment in wool processing in China for some time," Mr Small said.

"Two things will happen; inefficient processors will be pushed out and prices will go up and that's great for industry."

And Mr Small's forecast?

"People who kept going with fine wool through some bloody times will be rewarded," he predicted.

AustraliaPlus


 

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