Australian wool industry riding high

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International prices for wool soared to new highs in 2017 thanks to demand from China. Is it enough to call it a boom?

Amid record international wool prices, Australia’s long-struggling wool growers are asking themselves if they should finally be feeling comfortable.

International prices for wool - for a century Australia’s most lucrative export commodity - soared to new highs in 2017, peaking at 1700 cents per kilo on the Eastern Market Indicator.

At the Yennora Wool Centre in Sydney’s west, Bathurst-region farmer Murray Smith grabs some fibre from one of the hundreds of sample boxes in the sales room.

“This is what’s fetching the big money at the moment; 18-micron, possibly bringing 1,600 cents per kilo,” he tells SBS News. 

“This time last year, the same merino was bringing probably 1100 cents.”

Farmer Murray Smith with some wool samples.
Farmer Murray Smith with some wool samples.

“I think it’s a boom,” says Sydney-based wool broker Scott Carmody.

“(But) I don’t like to say the word ‘boom’ because that indicates the price can’t go higher and that it’s extraordinary.  I just think we’re at the right price, it’s probably been a long time coming.”

Further gains ahead

Australia remains the world’s biggest wool exporter and the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) sees further price gains. The government department predicts the value of exports could increase by up 13 per cent in 2017-18 to $4.1 billion.

China has long accounted for at least 70 per cent of Australia’s wool exports and is mostly responsible for the recent price spurt – especially for super-fine wool, defined as 17.6 to 18.5 microns in diameter.

But until six or seven years ago, wool manufacturing in China was focused on its own export market, including sales to top European suit makers.

Today Chinese factories are eyeing more than one billion increasingly affluent domestic consumers, keen on a premium product that for years had lost ground to cheaper synthetics.

Sheep shearing at Woolaroo Merino Stud, north of Canberra.
Sheep shearing at Woolaroo Merino Stud, north of Canberra.
SBS News
 

Daniel Hu checks the fibre samples before bidding at auction on behalf of his family-run export firm Kathaytex, a supplier to Chinese mills.

“Before, we wanted a low price and cheap products. But now (customers) want good quality … and a good fashion product,” he says.

Marketing strategies - including working with the fashion industry and young fashion ‘influencers’ on social media - are also helping to drive Chinese interest.

“It’s a wonderful time for the wool industry,” says NSW woolgrower Murray Smith.

“If you want to go and put some water on for your livestock, which you couldn’t do during drought, you now can afford to do it. If you want to buy hay for your stock, you’ve now got the money from your wool cheque to enable to you do it.”

'A long way from boom times'

Others dispute the notion of the greatest boom for the sector since the 1950s.

“I think those who speak of a boom don’t know what they’re talking about,” says Peter Walker of Woolaroo Merino Stud, a sheep breeders north of Canberra.

The wool industry has shrunk dramatically in terms of grower and sheep numbers, and farm sizes, since the 1991 collapse of the Wool Reserve Price Scheme - a government measure intended to stabilise prices.

Peter Walker of Woolaroo Merino Stud.
Peter Walker of Woolaroo Merino Stud.
SBS News

“When you take into account inflation and the much higher cost of production, we’re a long way from boom times,” says Mr Walker.

“If the price can consolidate and grow, and if it can compete with inflation and all the other cost pressures that we have, then it might be sustainable.”

National industry body WoolProducers Australia says soaring prices are at least halting the exodus from the long-struggling sector.

Looking ahead, broker Mr Carmody acknowledges the risks in Australia’s heavy reliance on China but dismisses concerns that wool could eventually price itself out of the market, in favour of perennial rivals synthetics and cotton.

“Everybody is reliant on one another in this game:  the wool grower … and at the other end of the chain, the manufacturer", he says.

"So as long as we can keep both parties happy, and at a price sustainable to each, this industry has a great future.”

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