Wool prices have risen to highs not seen in Australia in decades thanks to growing export demand and limited supply, according to Rural Bank’s 2017 Australian Wool Annual Review.
Stronger demand from processors and reduced supply saw the Eastern Market Indicator (EMI) rise by 10 per cent to 1507 cents a kilogram in the first half of 2017, while the 17 micron price guide rose 45pc in the past 12 months.
Wool prices are expected to remain strong in 2017/18, particularly for fine to medium wool categories, supported by growing export demand and limited, albeit now growing, supply from Australia.
The new report, launched by specialist insights team Ag Answers, provides producers and industry with a concise analysis of the Australian and global wool sector. The report also revealed reduced wool exports from major producers such as New Zealand, which will see Australian wool growers well positioned to enjoy the rare conditions of increasing production levels and higher prices.
After almost 20 years of declining shorn wool production, the 2015/16 financial year appears to have marked the turning point, with shorn wool production expected to reach 341,000 tonnes of greasy wool in 2016/17, an increase of 5pc on the previous year.
Rural Bank general manager agribusiness Andrew Smith said increased wool production was largely driven by the expanding national flock, set to rise by 4pc to 76.6 million head by June 2018.
“All states, except for Tasmania, experienced higher production levels, with favourable seasonal conditions boosting fleece weights for producers in the northern regions and Western Australia,” Mr Smith said.
“Wool growers are very keen to hold sheep – particularly wethers, with some producers experiencing gains in wool production per head due to shearing on a more frequent basis.
On the export front, the new report revealed an 8pc jump in the volume of wool exported accompanied by a 23pc rise in the value – with fine wool exports accounting for 50pc of all wool exported – further supported the higher prices.
“Export volumes are likely to continue to increase in 2017/18, with 75pc of wool exported destined for China, the world’s largest producer and exporter of woollen clothing,” Mr Smith said.
“Australia produces approximately a quarter of the world’s wool production, so an increase in production on our shores will have a significant impact on the global market.”
While warmer, wetter conditions in autumn saw producers enter winter with stock in good condition and available feed, the forecast for the second half of the year is drier, which could hold back feed production throughout 2017.
