China drives five year high for wool

Australian sheep producers have much to celebrate with the wool market recording its strongest week in five and a half years.
China drives five year high for wool China drives five year high for wool China drives five year high for wool China drives five year high for wool China drives five year high for wool

Demand from China and strong lamb prices have caused wool to soar.

Kristy Moroney

According to Meat and Livestock Australia (MLA) the wool market jumped to its highest level since 2011 reaching 67 cents, with the Eastern Market Indicator (EMI) closing at 1422 cents, three cents away from a record. Sydney recorded the highest price at 1539 cents.

The biggest gains were seen on fine textile (17 micron) wool that climbed an impressive 25 per cent.

Elders district wool manager Andrew Howells told ABC Rural fine wool production was expensive and merino sheep could be difficult to manage, but since around September, the market had seen a big turnaround.

Data from the Australian Bureau of Statistics (ABS) shows lamb slaughter in 2016 increased 2% on the year before and MLA figures show farmers have pursued strong lamb (sheep meat) prices over wool for the past three years.

The price increase can be attributed to a smaller flock being kept for wool production and China’s growing appetite for raw textiles. Almost 75% of all Australian wool ends up in China where it is produced into clothing.

Mr Howells said the uniform market in China was "massive", but there was now a lot more retail demand for items such as fake fur coats, from the general population.

"We're also seeing a lot more wool consumed in China by the domestic market," he said.

The fine wool shortage is also due to the weather, as low micron wool flourishes in hot dry conditions. During a recent drought in western Victoria about three years ago, one of Australia’s largest wool producing areas, an oversupply of fine wool was created.

However as the drought broke, more and more farmers turned away from wool and toward prime lamb production.

"Because everyone was turning away from fine wool, there's been a lack of supply," Mr Howells said.

"Now that we've had a better season [with record rainfall in 2016], the supply of fine wool is very low,” he said.

"Once all the rain started to fall, the clip became a lot broader. We're going to see the influence of that rain in the market."

According to the wool expert, such a strong opening to the 2017 wool market indicated the importance of farmers to breed sheep to not only produce strong lamb characteristics, but good wool as well.

  • Kondinin Group Research: "This is the best farm-related research around". Read the latest.
  • Research Report: Multispectral Imagery. Exploring imagery options, applications and benefits.
  • For instant access to all Kondinin Group Research Reports, become a member today.