For a century, toiling wool growers epitomised Australia’s rise as an export superpower until the development of synthetic fibres unravelled the global wool industry in the 1960s. But strong demand in China, changing consumer tastes and tight supply mean the world’s biggest wool exporter is once again “riding on the sheep’s back” — a reference to a time when the industry gave Australians one of the highest standards of living in the world.
“I remember the last wool boom in 1951 and this one is probably better because wool prices are up at the same time as prices for lamb and mutton are high,” says Peter Small, a 76-year-old farmer who runs 6,000 merino ewes on a farm in Victoria.
Australian wool prices hit a record of A$14.39 per kilogramme last month and analysts expect the good times to continue thanks to strong demand for higher-quality wool and tightening supply.
“Wool is a luxury product and as people get richer they want higher quality,” says Mr Small, who toured Chinese wool manufacturers last month.
Australia accounts for about 70 per cent of the world’s supply of merino wool, one of the softest and finest varieties. A quarter of a century ago Australian wool exports were worth A$3.5bn — considerably more than iron ore, which is now the country’s biggest export.
But times have been tough for wool producers since the collapse of a government-run reserve price scheme in 1991, which ushered in almost two decades of weak prices and decline in a once-dominant industry.
A rise in wool prices in 2010-11 was not sustained, partly because farmers had more profitable options because of rising returns on beef, dairy, lamb and mutton.
Since then the Australian sheep flock has more than halved to 70m animals, while wool produced has fallen by a similar margin to 325,000 tonnes.
It is a similar story of decline on a global level, with clean wool production falling 42 per cent over the past quarter-century to 1.16m tonnes last year, while synthetic fibre output has more than quadrupled to 68.9m tonnes, according to International Wool Textile Organisation data.
“We have now reached a stage where supply and demand look to be in balance,” says Peter Morgan, director of the Australian Council of Wool Exporters. “China is an enormous factor as it takes about three-quarters of our wool and consumers there are moving to high-quality grades.”
Australian Wool Innovation, a non-profit owned by 24,000 wool producers, is stepping up marketing in North America, Europe and China.
AWI works with fashion labels and sportswear companies such as Adidas to develop new products including waterproof woollen jackets and moisture-wicking sportswear. Last month Victoria Beckham, the fashion designer and former pop star, judged its annual Woolmark prize, and wool featured prominently at Europe’s annual fashion shows.
“We pitch our wool at the pinnacle of the fashion triangle and then you can also see a ripple effect through the industry,” says Stuart McCullough, AWI chief executive, who started his career as a sheep farm “jackaroo” before moving into management. “Wool is incredibly comfortable to wear, it doesn’t smell when it gets wet or make you sweat like synthetics and it is attractive to young people, who like the fact it is a natural fibre.”
However, analysts are cautious, pointing out that the price increases so far are concentrated on superfine wool varieties, and a strong US dollar means the international trading price has not reached the record levels wool hit in 2011.
“The price of suits shouldn’t jump due to the rise in Australian wool prices,” says Chris Wilcox, chairman of the IWTO.
Whether the recent rise in prices is enough to tempt more back into the industry is unclear. Meat prices remain near record highs, which may persuade some farmers to continue favouring crossbreeds rather than merino ewes. Cross-breeds produce lower-quality wool, which tends to be used in carpets and furnishings.
“There are good margins at these prices but I don’t think it will attract a lot of supply initially,” says Jock Whittle, chief executive of Paraway, a livestock company that owns about 230,000 ewes.
“But if the price stays high to the end of 2017 we might see an uptick in the national sheep flock. Wool hasn’t been a sexy story for a quarter of a century but the true believers are at last about to see some benefits.”