Stockpiles building as growers sit on supply

Woolgrowers start holding stocks as global fibre demand dries-up

Sheep
Growers are increasingly holding back wool from sale, but brokers warn keeping stocks for lengthy periods may not be a wise investment at this stage of the economic cycle.

Growers are increasingly holding back wool from sale, but brokers warn keeping stocks for lengthy periods may not be a wise investment at this stage of the economic cycle.

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Mini wool 'stockpiles' are building as growers hold stocks and new orders remain scarce.

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Wool values continue to deteriorate as we adjust to our new isolated lifestyles and remain in 'lockdown' mode - with some minor levels of relaxation to the rules about to be tested.

This pandemic has affected all developed economies on earth, as it does not discriminate between the rich and the poor.

Demand for wool fibre is all but gone and we now see stock increasing in all sectors as new orders remain scarce.

Wool is being stocked on farms, in broker warehouses and as early stage articles - including wool tops, yarn, fabric and garments.

This new mini wool 'stockpile' is emerging in our market place more than 17 years after the famous 1980-90's stockpile was dissolved.

It looks likely that we are in for a prolonged period of lower wool prices, as we remain directly linked to consumer spending habits.

Confidence is at an all-time low and comparable to that seen in previous world war events.

As a wool grower, it is such an important time to consider your wool selling strategy.

Holding wool for lengthy periods may not be a wise investment at this stage of the economic cycle.

How long will it be before demand will return for wool textiles and push prices higher?

Once demand returns, how long will it take to digest the backlog of stock in our pipeline?

Answering these key questions is critical to determining your future selling strategy.

If it takes several wool growing seasons before fundamentals are healthy and prices again increase, are you prepared to stock multiple wool clips as part of your strategy?

Can your business afford to do so from a cash flow perspective?

Why not consider buying wool as an investment if you are convinced that storing your own wool clip is the right strategy?

From a primary production perspective, the positive news is that our cost of wool and meat production in the coming season may be reduced due to widespread rain received across many parts of Australia during the autumn months.

This season has great primary production potential.

Focus on lowering your cost of wool production as we move through this cycle.

Our ability to grow large amounts of paddock feed has greatly relieved the pressure compared to this time last season, when hand feeding was required.

Water storages are all but full, which provides a healthy environment to our sheep and wool growing systems going into winter.

Make sure you request a quote from your wool service provider before the start of the new season.

It is not good business to presume that their fees remain the same as the previous season.

Good luck and let's prepare for the worst - and then we get a bonus if it's better than we anticipate.

Read the play and develop a strategic plan with your wool broker as we anticipate lower wool prices in the short to medium term.

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