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Australia’s drought continues to bite

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Australia’s continuing drought is fuelling a drop in wool production. Such conditions may cause damage in many of the wool growing regions in Australia, at least in the short term, says the Australian Wool Innovation (AWI. And if there is no relief soon, the wool supply situation may get worse for the longer term.

 

But as wool has been attracting high prices, farmers have been shearing their sheep earlier than normal to get some cash flow, to help with feed to keep their stock alive. “Wool that’s been shorn at either six months or eight months is certainly an increasing trend that we’ve seen growers talk a lot more about,” says Georgia Twomey, Rabobank commodity analyst, who commented that this would change the normal supply of wool this financial year.

 

In the previous wool year the supply of 20 to 24 micron wool declined and the amount of 17 to 19 micron wool increased as their wool micron becomes finer due to nutritional stress from lower quality feed.

“We expect that will continue with the dry conditions that have been persisting, and that will play into certainty the price relativities of those fibres and the micron ranges that we see,” Georgia Twomey said.

 

“We’re seeing a bit of resistance to the high prices of wool, certainly the European trade fairs before their holidays in the last couple of weeks have seen probably a decline of 15 per cent in volume of orders both the yarn and fabric coming out of the high fashion labels,” said Steven Reed of Michell Wool in Adelaide, who agreed with the forecast wool supply would drop, and added that he believed demand was also dropping overseas.

Nevertheless most major brands were running at high production rates which created the pull through seen last year so Steven Reed said a 15% decline might only be a 5% – 10% cent decline based on their normal utilisation.

“If we do see a degree of confidence in the marketplace, which is really from consumers to buy wool garments at this price, and then that gives people confidence to replenish the pipeline, then demand will probably outstrip supply,” he said.

“What happens to the Chinese consumer going forward is critical to the price of wool … and there is uncertainty there,” he said. China buys most of Australia’s wool, and Chinese consumers are also the largest buyers of woollen products.

Source: AWI and ABC News

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