Mecardo said the record wool prices were due to strong demand from China and short supply © 123RF
Mecardo said the record wool prices were due to strong demand from China and short supply © 123RF

Wool revival sees record prices

6 November 2017

Australia’s wool industry has revived to levels not seen since the 1950s, with record prices set this week and billions in export sales, according to market analysts.

Agricultural analysts Mecardo said strong demand from China and a short supply of wool were behind the surge, with the primary price signal—the AWEX Eastern Market Indicator (AWEX-EMI)— reaching an all-time high of 1,623c/kg.

A recent report by Rural Bank found Australian wool production increased by 5.3% in the last financial year and there was a 14% increase in the value of wool exports.

It said the increase was largely due to increased demand from China, with total wool exports now worth $2.4bn. 

However, woolgrowers have warned that demand will surpasses supply, leading to a void next year.

Marty Moses, a Riverina wool broker, told ABC that there was urgency among northern hemisphere buyers to secure wool before supply dwindled.

With the AWEX-EMI sitting 320c/kg above last year’s average price, Moses said growers were eager to get as much wool on the market as possible to take advantage of the price.

“Everyone is selling wool as it comes off and we are going to have a supply void after Christmas and I think buyers are waking up and getting wool on board,” he said.

However, Robert Herrmann, analyst for Mecardo, said despite the high prices, the industry would not reach the heights seen in the 1950s.

He said there was too much competition for land among different agriculture sectors. 

“We’ve seen the decline of sheep numbers correspond with the increase in cropping acres and it’s hard to see that that’s going to go away,” he said. 

“It’s unlikely we’re going to see a mass swing back into sheep.”

The national flock went from 180m in the 1990s to around 70m today.

“We just kept selling off or slaughtering more sheep than we were breeding progressively pretty much all the way until now and it’s only just started to level out,” said Herrman.

Meanwhile, rising lamb and wool shipments have helped Victoria set a new record with food and fibre exports reaching $12.8bn—the biggest total in the state’s history.

The 2016-17 Food and Fibre Export Performance Report said Victoria accounts for 25% of Australia’s food and fibre exports, despite taking up just 3% of the country’s land mass.

In 2016-17, the state’s wool exports rose to $1.8bn, accounting for 55% of the nation’s wool exports. There was a 19% increase in exports to China.

Lamb exports rose to $764m, with a 23% increase in exports to the US.

Responding to the report, the Victorian Farmers Federation said a key strength of the state’s food and fibre sector was its diversity and reputation for producing high quality, clean and healthy food for key export regions such as Asia.

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