Wool is back, big time

AUSTRALIAN wool growers are receiving some of their best returns in decades with the AWEX Eastern Market Indicator (EMI) hitting an all-time high of 1,681 cents per kilogram in November according to Rural Bank’s new Australian Wool Update.

This, combined with a 30 per cent jump in wool prices year-on-year, is the latest good news for wool growers in what has been an exceptional three and a half years of growth for the industry after decades in the doldrums.

Wool production is forecast to remain historically low at 340 million kilograms in 2017/18 and the slow process of increasing flock sizes will ensure a large wool price drop is unlikely any time soon.

Rural Bank general manager for agribusiness Andrew Smith said that it was magnificent to see the Australian wool market in such robust health after another record breaking year for growers.

“The fundamentals of the wool market remain favourable for our wool producers.

“Strong export demand from China and Italy – especially for fine Merino wool – combined with declining wool production, has resulted in a record surge in the price of wool, and a windfall for Aussie wool growers.

“All indications are that these market conditions will continue well into the future, as domestic production is not expected to increase enough in volume to significantly affect prices for years to come.

The increased international demand in 2017 for Australian wool has seen the value of the commodity exported to overseas markets grow by a staggering $355 million year-on-year.

One of the key drivers behind this increased export demand for Australian wool has been China.

With almost 80 per cent of all Australian wool exported to the Chinese market in 2017 this trend looks set to continue as demand in the country for woollen products rises in parallel with incomes.

The new update also highlights how Australia’s wool clip has drifted towards producing finer wool.

“The demand for superfine wool in high quality clothing has been increasing internationally, and this trend has prompted wool growers to target this market segment,” Mr Smith said.

“Aussie growers are taking advantage of clothing manufacturers’ need for superfine wool as well as the demand from China’s burgeoning middle classes for higher end clothing.”