Wool demand is continuing to grow in EU, US & China

The demand for wool is continuing to grow in major international markets for imported clothing like the EU and the US. The demand is forecast to grow more strongly in China—the world's largest producer and exporter of woollen clothing and textiles. Increasing domestic consumption of luxury woollen textiles is also a factor pushing wool demand in China.

The continuing growth in wool demand has led to increase in the price of wool in Australian dollars since 2014, Senior ABARES economist Dr Caroline Gunning-Trant said in her analysis presented at ABARES Outlook 2017. Australia's leading forum for public and private decision-makers in agriculture, Outlook marks its 47th annual conference this year with expert analysis of innovation in agriculture.

"In the two years since early January 2015, prices have risen by about 35 per cent," Gunning-Trant said. "The Australian Eastern Market Indicator (EMI) wool price is forecast to rise by 8 per cent in 2016–17 to around 1,360 c/kg."

"Prices are expected to peak next year before easing in real terms as wool production increases… And by the end of 2021–22, prices are expected to still be relatively high at around 10 per cent above the 10 year average in real terms," she said.

The upward trend in prices reflects the constrained supply of apparel wool—given lower flock numbers—and firm demand, particularly for fine wool.

"By the end of 2016–17, shorn wool production is forecast to be 5 per cent higher than last year, reflecting flock rebuilding across the sector supported by good pasture growth on the back of 2016 rainfall… And the national sheep flock is forecast to increase to 73.6 million head in 2016–17 and to continue increasing to around 83 million head by 2021–22," she added.

According to Gunning-Trant, wool exports are forecast to rise by 4 per cent and reach 442,000 tonnes in 2017–18, as the expanding national flock results in further increases to the number of sheep shorn. "This trend is expected to continue over the medium term and exports in 2021–22 are projected to grow to around 492,000 tonnes, valued at $3.9 billion, in real terms."

The export growth is supported by a slow but steady increase in international demand, especially in the EU, the US and the Chinese markets.