Coarse wool prices significantly decreasing on last year

Thomas Elder Markets senior analyst Matt Dalgleish said a steady increase in meat sheep production over time alongside international COVID-induced demand issues had created an abundance of coarse wool with a reduced price tag.

Mr Dalgleish said finer-micron wool had experienced solid growth in prices with 17 micron wool up 7 per cent on last year, while in stark contrast 28 micron wool was now down 15pc on last year's prices.

"If farmers cut the wool and sell it at these prices, they are looking at a loss in terms of the cost to take it off the sheep," he said.

Elders Ballarat wool manager and auctioneer Elliot Lindley said the low prices were leading some farmers to hold on to their coarse wool clips in the hope that the market might rebound.

"There is certainly wool in that 28-micron category being stored on-farm because the price is not good enough for people to sell," he said.

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However, Mr Dalgleish said private stockpiling had the potential to create more problems in the future.

"Some people don't want to sell their wool at a loss, so they just hold on to it hoping that the price is going to come back up," he said.

"So that will cause another stockpile of sorts, only it will just be a stockpile of heavier and coarser wool.

"That is going to cause issues and is really just kicking the can down the road a bit."

Elders Albury Wodonga district wool manager Rex Bennett said while he did not expect a price increase in the foreseeable future, coarse wool stockpiling could cause market issues if the market was flooded with an abundance of stockpiled wool in the future.

"If there is a price increase, there may be a fair bit of wool on stockpile that will readily become available and that may put a ceiling on any upside," he said.

Mr Dalgleish said in terms of uses, much of this coarse wool goes into carpets, curtains and haberdashery production, but the usual hotel refurbishments, which utilise a great deal of these products, had largely been postponed around the world due to reduced travel and tourism.

"So there's a lot of furnishings that were just not being made for some time," he said.

"That caused a downturn in demand for that kind of product which was where a lot of the heavier wool was going."

Mr Bennett also highlighted additional COVID-induced transport factors still affecting the industry.

"There is an issue with the availability of ships and getting container space has been a genuine concern for a number of exporters in the last six to 12 months," he said.

Despite good price performances in finer-micron wool markets, Mr Dalgleish said he doubted there would be any major improvement in coarse wool prices in the near future.

"I don't think there is an immediate solution," he said.

"It seems to me that we are in a bit of a high supply-low demand trajectory for the time being, for the next five or so years at least.

"The fine and medium wool is holding up really well in terms of pricing; the coarse stuff is a bit of an ugly duckling at the moment and I can't see that changing in a hurry."

Mr Lindley said a lot of producers were still prepared to sell their coarse wool because the primary business decisions in those enterprises were mostly directed on meat production.

He said in many farming operations across eastern Australia, the crossbred wool was mostly a beneficial byproduct rather than a key business driver.

"A lot of people are real about the situation," he said.

"If you are in that micron area and above, you are more geared to meat production than anything else, so that is the main driver.

"Wool in that 28-micron area is not the main driver."