Demand for Australian Wool Predicted to Rise

At the start of 2021 optimism was growing for the resurgence of the Australian wool market. There was an increase in demand from overseas and the market had increased almost to the levels it was at prior to COVID-19 issues that first started to take effect in April 2020.

These issues caused serious disruption in the wool market in Australia throughout 2020. The dramatic changes at the beginning of 2021 were undoubtedly met with optimism but there was also some concern that the rise in the market might be too steep to be sustainable. Given the fact that growth is continuing at a good pace, it seems that any doubts are likely to be unfounded.

Key points

  • There is much optimism about growth in the Australian wool industry.
  • Two major factors in the current positivity are growth in production demand and growth in demand from the overseas retail sector.
  • Trade problems with China are an issue but are not dampening enthusiasm.
  • Northern hemisphere markets will have a major impact on growth in the Australian wool industry.

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Continuing reason to be confident about the Australian wool market

There are two major factors which mean that things continue to look positive for the wool industry in Australia; production demand is growing and so is demand from the overseas retail sector. There is specific data which shows retail markets in the UK and the USA offer a high level of potential.

Much of this is due to the successful vaccine programmes in the countries which are helping the retail sector to open up. At the same time, there is growing demand for consumer goods from the general public in these countries. There was a particularly strong wool market in the UK in recent months as the country experienced an exceptionally cold spring. That situation is likely to continue later in the year when the northern hemisphere winter takes hold.

 

 

In addition, sheep industry market data suggests that people are more likely to retain breeding stock for a year longer. This means that producers should be able to cut full fleeces rather than lambs’ fleeces thereby increasing the volume of wool.

There is a potential difficulty given the current negative situation with China concerning trade. There will be a need for other markets to be explored such as the USA where the quality woollen apparel market has remained buoyant throughout the pandemic.  This means that there is likely to be demand for fine wools such as Australian merino wool for the coming autumn/winter season.

Problems with China not preventing optimism

There is no doubt that there is concern due to the trade tensions with China. This is hardly surprising given that around two-thirds of all Australian wool production is exported to the Asian country. This potential unpredictability has not stopped predictions that the Australian wool market will continue to grow for the next five years. This is according to the ANZ Agri Commodity Report.

The ANZ’s associate director of agribusiness research Madeleine Swan said that the optimism is largely due to demand coming from the northern hemisphere. This means that the market will have a major influence on Australian wool especially when the northern hemisphere autumn/winter season arrives.

Ms Swan also indicated that although global economies will impact Australian wool in the short to medium term, overall supply of wool in the country is expected to grow for at least the next five years.

The rise is predicted to be 20% by 2025/26. This is despite the fact that there are fewer sheep being shorn. This shows that the condition of sheep and wool yields are currently strong during what is a good season.

The rise in production could result in stockpiles which would be damaging to the price of wool and could see producers looking elsewhere for profits. However, there is a good chance that the ongoing growth of wool exports will balance wool production thereby negating the stockpiling problem.

It remains to be seen whether all of the optimism about the Australian wool market will be justified but the data so far is positive. Only in the years to come will we see if the predictions for continuing growth in the Australian wool industry are correct.

 

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