The price of wool has reached an historic high after decades of poor returns and Australian woolgrowers are saying the market is stronger than it has been in 30 years.
The price signal, the eastern market indicator, reached a record $18.30 per kilogram this month, double where it was eight years ago. The hike has been driven by strong demand from China and European fashion houses, as well as growing interest from shoe and sportswear companies in the US.
While wary farmers are reluctant to call it a boom, the Australian Wool Innovation chief executive, Stuart McCullough, is emphatic.
“It’s a boom, all right. I’ve been in the industry for 30 years and I can’t remember it being this good,” he said. “I don’t see any reason it would slow down soon. We have 300 million middle-class Chinese and wool will always feature in the spending habits of the wealthy.”
Almost 80 per cent of Australian wool exports go to China. There is also strong demand for high-quality superfine wool from Italy.McCullough said a trend towards renewable and biodegradable fibres, particularly with younger generations, is bringing new opportunities. He said the popularity of “athleisure” – clothing suitable for exercise and casual wear – has created a great entry point for Australian wool into the US market.
The AWI, which engages in research and marketing to promote Australian wool abroad, has been working on product development with major brands, such as Adidas, Nike and Puma, to incorporate wool into their shoes and sportswear.
McCullough suspects many farmers who abandoned wool over the past 20 years would be “looking over their fences now a little green with envy”.
It is expected the price of wool will continue to climb and reach $20 per kilogram within the next five years, according to the federal government’s quarterly agricultural commodities report released this week. While the price is currently the highest it has been, in real terms it falls short of the boom in the 80s.
John Colley, the managing director of Australian Wool Network, the country’s largest independent wool broker, is cautiously optimistic. He said the real acid test will come in about nine months when the wool currently being sold at auctions makes its way into garments.
“If you go back nine months, the price was a lot cheaper, so the price hasn’t been passed on to the consumer yet and that becomes the real acid test of whether prices are sustainable,” he said. “It forces the price up, but at the other end of the pipeline – the textile end – the risk is manufacturers will turn to other fibres that are cheaper.”
Nonetheless, Colley said returns are the best they have been in the 28 years he has been growing wool on his property at Canowindra, 300km west of Sydney. He said the prices have finally reached the point necessary to keep the next generation interested in growing wool.
The number of Australian woolgrowers and sheep declined dramatically following the 1991 collapse of the wool reserve price scheme, which stabilised prices. What followed were decades of hardship for those who persevered with wool.
Woolgrower Richard Halliday has a property near the South Australia-Victoria border and has been farming wool his whole life. He said the surging demand for wool in recent years has been validating for those who stuck with sheep through the tough years.
“We had a very brief foray into doing a bit of extra cropping, but after a drier-than-average season we realised wool is what we do best and we concentrated on that,” said Halliday, who is the president of the peak national body for woolgrowers, Wool Producers Australia. “The current market has given us growers a great opportunity to deal with the debt that’s been generated and make infrastructural improvements on our properties.”
Source TheGuardian.com