Values skin deep

Knox International director Adrian Knox made the comment to 130 Southern Prime Lamb Group (SPLG) producers and industry during a tour of the Australian Lamb Company abattoir at Colac.

He said a "perfect storm" had hit Australia's sheepskin market, with the challenges of major leather-processing countries of China and Russia hurting demand.

The forced closure of several Chinese tanneries due to environmental concerns, coupled with unrest between Russia and Ukraine, and a mild winter had impacted the market and led to some of the poorest prices paid for skins in recent times.

Currently skins average $12, with the best peaking at about $15, while reports of lamb skins with short-wool lengths under half-an-inch selling at $1 to $2.

Mr Knox said these prices were not forecast to improve unless there was a rebalancing of the market.

"I don't think prices will get much better until we see a complete (market) collapse – or it will be status quo rather than a gradual improvement," he said.

"I don't see any new (fashion) products and we are in that limbo position with the weak Russian market and China's environment problem.

"There have been extremely low values on low-grade and less dense types and I think those values need to become more broad base and we need to see lower across the board to spark new interest from the fashion (industry)."

The main drivers to spark improved prices would be fashion and environment, however Mr Knox said fibre-fashion was created from cheap prices, but "at the moment, we are not low enough".

The global trend of the Australian Ugg boot has inflated the sheepskin market for several years, however cheaper material imitations, rising hide prices and warmer weather have seen sales significantly decline in the past two years.

Australian skins receiving a 100 per cent premium over most other origins products because of the higher Merino content and dense, straight wool.

"You won't see won't see any (new trend using sheepskin) develop until prices are way back," Mr Knox said.

Currently prices are sold between US $17-$20, which he said was historically high.

"To see the creation of new productions we need to get back towards US$10, otherwise it will be the status quo," Mr Knox said.

However, market stability is on the horizon with the reopening of China tanneries and improvement with the Russian economy sparking interest in sheepskins orders.

Other major issues discussed during the SPLG tour was the worthless value of Dorper skins as well as the recommended wool length of 1-2 inches to avoid price reductions.

The impact from the dry autumn conditions last year is still being felt with Mr Knox reporting high levels of damaged skins as a result of a health shock linked to rapid change of diet.

The growing issue may lead to traders demanding verification of how livestock were raised and any significant changes in feed.

Mr Knox said damaged skins reduced the value and were commonly found in feedlot-finished livestock.

"One big problem is tender wools where the skin is breaking because of a health shock or change in food, with grain feeding," he said.

"It is predominantly attached to feedlotting and wool breaks is becoming a massive problem in the industry that we can't see when (the sheep) is alive.

"It turns a $14 skin into some that is worthless and we need to work out how to avoid that."