Australian wool grower confidence grows as wool market recovery continues
“The price of wool has lifted over 50 per cent in the last six months, with the benchmark Eastern Market Indicator now sitting at a level many would say is sustainable compared to where it has been for some years.” It’s a simple observation from Australian Wool Innovation (AWI) Chairman George Millington, but one that captures the changing mood across Australia’s wool industry. This is according to August Market report released by AWI.
The report says: after several difficult years, stronger wool prices are beginning to restore confidence throughout the supply chain. While seasonal conditions remain mixed across parts of the country, improving market returns and renewed optimism are providing reasons for cautious confidence as growers look ahead.
“With this, sentiment amongst woolgrowers has, not surprisingly, also lifted,” Mr Millington said. That improving outlook is also reflected at the farm gate. The latest Sheep Producers Intentions Survey, jointly conducted by Meat & Livestock Australia (MLA) and AWI, found producers are increasingly focused on retaining breeding stock and rebuilding flock numbers, rather than reducing ewe numbers as many were forced to do only 12 months ago.
Thirty-seven per cent of respondents now intend increasing breeding ewe numbers, while only 28 per cent expect to reduce them. Confidence in the wool industry also recorded one of its strongest improvements in recent years, with net sentiment increasing by 80 points year-on-year. More than half of respondents now hold a positive outlook for wool, compared with just seven per cent reporting a negative view a year earlier.
The improving sentiment has also been reflected in market performance throughout July. By the close of the month, the benchmark Eastern Market Indicator (EMI) had settled at 1,873 cents per kilogram clean, capping off another positive month for the Australian wool market. Competition remained strongest across the Merino fleece sector, with fine and medium microns continuing to attract consistent buyer support.
By month’s end, the AWEX Micron Price Guides finished at approximately:
• 17 micron – 2,542 c/kg
• 18 micron – 2,455 c/kg
• 19 micron – 2,269 c/kg • 20 micron – 2,131 c/kg
• 21 micron – 2,097 c/kg
Although the market eased slightly in the final selling week before the August recess, prices remain well above those recorded this time last year, reflecting stronger competition for Australian wool.
For Mr Millington, the recent lift in prices is only part of the story. During discussions with Chinese processors, he said there was clear recognition that Australian wool production was tightening and that sustainable prices were essential if growers were to continue producing wool.
“We made it very clear, respectfully but very clearly, that the prices being paid three years ago were unsustainable,” he said. “Australian growers need prices around where we are now, or higher, to run a sustainable business. ”Mr Millington said processors also recognised that Australian producers had genuine enterprise choices. “Growers are running businesses,” he said. “They have alternatives. They don’t have to grow wool. They can crop, they can run cattle or produce prime lambs. They’ll allocate their capital where they can make the best long-term return.”
Encouragingly, that understanding is being backed by continued investment throughout China’s processing sector. “I met with processors responsible for buying nearly 80 per cent of Australia’s wool clip,” Mr Millington said. “They’re continuing to invest in new machinery and new technology. They’re talking with their cheque books.”
Mr Millington said another positive trend was the growing demand for wool within China itself. While China currently purchases almost 89 per cent of Australia’s wool clip, an increasing proportion is now being consumed domestically rather than being manufactured solely for export. Consumers are increasingly embracing lightweight wool garments designed for year-round wear, with demand for natural fibres continuing to strengthen.
“We’re seeing a real demand for wool as a 365-day fibre,” he said. “Consumers are becoming much more aware of wool’s natural performance attributes, particularly for next-to-skin applications.” He said growing awareness of the environmental advantages of natural fibres was also influencing purchasing decisions.
“People are finally realising that the rise of synthetics and fast fashion means you’re effectively wearing a plastic product.” “That’s a very easy story for us to tell because wool is a natural, renewable fibre.”
Looking ahead, Mr Millington believes the industry’s outlook continues to strengthen. “I think the penny has finally dropped,” he said. “The people buying Australian wool understand that supply is tightening, they’re continuing to invest in the supply chain and they’re positive about the future.” While challenges remain, particularly around seasonal conditions and production costs, the combination of stronger market returns, improving producer sentiment and continued confidence throughout the global supply chain provides encouraging signs for the Australian wool industry.
Source: AWI