Effects of buoyant wool prices felt ‘Down Under’

Australian market analysts have pointed to farmers switching back to keeping Merino wethers for wool as one factor causing low slaughter numbers this spring.

Merino wool prices have been buoyant for several years, and rock-bottom grain prices have made it particularly attractive to hold onto stock, even as Australia faces into a dry year.

“All wool price indicators in the Merino sector are registering at the 100th percentile bands measured over the past five years,” industry body Australian Wool Innovation said earlier this month.

“The Eastern Market Wool Indicator has continued an upward trajectory, breaking new ground in 2017. Discussions from MLA’s Lamb Forecasting Advisory Committee Meeting in March indicate that many producers are also retaining Merino wethers and wether lambs to generate income from wool,” according to market analysis by Meat and Livestock Australia (MLA) published earlier this month.

Much of the demand is being driven by fashion trends. Wool fell out of favour for producers when it was faced with competition from synthetic fibres – and prices collapsed.

But now customers are demanding wool clothing – prized for its durability – as a premium product in lieu of ‘fast fashion’.  Customers are also demanding finer wools as a premium product in the active-wear segments previously dominated by synthetic gear – and that, according to the industry, is what’s keeping demand strong.

“Prices have been hovering above 1,000c/kg for seven years as users of wool globally have had to come to terms with the fact that wool supply is no longer ‘on tap’,”  The Woolmark Company’s General Manager for the Eastern Hemisphere John Roberts wrote in a briefing note last month.

This had been prompting global processors and, more recently, retailers and consumers to understand that our fibre is a precious natural product of finite supply.

Wool’s decline as a commodity has made it a much safer bet for farmers facing a volatile meat market, with Australian Wool Innovation recommending farmers there to consider minimum price contracts and future options to guarantee their income.