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Australia: Draught hits wool production

Australian wool prices are up 20 per cent. Australia controls 90 per cent of global fine-wool exports, where demand is being driven by Chinese wool mills and Italian garment makers. While wool has long been used by suit-makers, the surge in popularity is being driven by fitness and leisure clothing manufacturers looking for soft, durable and natural fibers.

But drought savaging Australia's east, where the bulk of the country's wool is produced, is hitting flock numbers, leading to lower production, threats to quality, and higher prices.

Like any commodity, wool has had its ups and downs, with sharp price spikes followed by troughs. This has prompted many overseas buyers to run down their stocks and wait for prices to fall. The wool industry in Australia has a big base of Chinese clients who mill the raw wool into fabric.

The threat of a fairly dramatic reduction in supply next year is underpinning the market. Many Australian farmers, meanwhile, are selling their older sheep to reduce their exposure to rocketing feed costs as the drought lingers, and to take advantage of high mutton prices. Lamb and sheep sales are running at around 15 per cent more than this time last year.