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Chinese demand raises Australian wool prices

Australia famously rode to prosperity on the sheep’s back during the 20th century, fine tuning Merino breeds to produce a soft, durable and natural fiber. Demand comes from Europe and has now extended to Asia, and China in particular. But high wool prices are having an impact on clothing makers. Australia provides about 90 per cent of the world’s exported fine wool used in clothing manufacturing.

Prices for very fine wool used for clothing have hit a record high, thanks in large part to ferocious demand from Chinese garment makers. That’s more than three times the price during the early 1990s. Those who can shift their wool are still making hay. Unlike most agricultural commodities, wool can hold its value for many years if properly stored.

Australia’s wool output is set to grow just 1.4 per cent over the next 12 months. Australia’s sheep count is at 70.4 million, representing the fourth lowest level on record. That is well under half the flock in the early 1990s. However, Australia’s modest growth is still expected to outpace global competitors. World-wide wool output is expected to increase 0.5 per cent this year amid unfavorable weather conditions in competitors Argentina and South Africa. New Zealand production is also forecast to be stagnant as farmers cull sheep and lambs to capitalise on high meat prices.