China stockpiles as coarse wool prices remain at historically low values due to drop in global demand

Historically low prices for coarse wool types are not covering the cost of production, causing ongoing market concerns and woolgrowers to retain bales on farm, while China has stockpiled 600,000 bales.

Woolproducers Australia chief executive Jo Hall reported on the sad tale of coarse wool after returning from the International Wool and Textile Organisation’s Congress in Japan last month.

Ms Hall said during the Growers Forum at the Congress, “we heard a number of reports from production countries who produce broader wools indicating that the prices currently being received were not covering the cost of production”.

“Both the UK and New Zealand reported pretty bleak scenarios of their industries, which has been the case for some time,” she said.

“Globally, there is low demand for broader micron wools and there is plenty of these types of wool already in storage, with one report of 600,000 bales of purchased crossbred wool sitting in China, which will need to be worked through the system.

“The low demand, coupled with wool in storage and continued production, means that we weren’t hearing that there will be any positive movement in the market on crossbred wool for quite some time.”

Stockpiling wool is not just happening in China — according to Australian Wool Innovation there were still a high volume of stocks held globally of the broader wool types.

“This exists all the way down the pipeline from yarn back to greasy held in store and even on farm, where possible, to avoid costs of commercial warehousing,” AWI reported in its The Broader View, March 2023

PGG Wrightson Wool, South Island (NZ) Market Update, for June 8, by auction manager Dave Burridge, recorded “strong demand for super and good style crossbred fleece and second shear wool types” with an eight per cent increase in good style crossbred fleece to $3.85kg clean, while average style rose five per cent to $3kg clean.

Second shear 50-100mm length good style rose three per cent to $3.50kg clean, while 50-100mm length average style also rose three per cent to $2.90kg clean.

“End of season lambs wool showing high colour readings struggled, while good style lambs wool around 31-32 micron sold more readily,” Mr Burridge said.

“The early indication for mid micron wools to come is that current interest is limited, reflecting the market tone in Australia.”

NSW is the largest growing State of wool greater than 23.5 micron in Australia, closely followed by Victoria.

Australian Wool Testing Authority key test data shows at the start of March 2023, 19.1 per cent of all wool tested in the 2022/23 season was broader than 23.5 micron, an increase from 14 per cent just four months previous.

AWI noted that the crossbred wool type that was now being produced across a large volume of that sector was “very much inferior to what Australia used to produce prior to the introduction of the composite breeds”.

“While Australia does retain a good portion of better crossbred wool types, market forces have impacted heavily on their values,” AWI reported.

“With many inferior lots available at a much cheaper price, some extravagant blending takes place by buyers and overseas manufacturers which pulls all prices back — no longer does Australia have that quality premium, particularly for wools broader than 30 microns.”

All crossbred wool price indicators are sitting at very low historical levels, and while there has been some price stability in the past 12 months it is at “very low values”, with quite often “the cost of harvesting and selling preventing any margin or profit from the wool portion of the sheep meat and lamb enterprise”.