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Wool producers chasing fat lamb profits as fibre loses a third of its value this financial year

By Mike Pritchard, Josh Becker and David Claughton, Saturday June 27, 2020 - 14:30 EST
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The wool price collapsed this financial year, losing a third of its value, but fat lambs are riding high. - ABC

As the financial year comes to an end and the dust settles on the collapse of the wool market, farmers are looking at the meat side of the industry for profit.



Wool prices dropped 35 per cent in 2019-2020, but sheep meat prices are riding high with the national indicator hovering around 900c/kg cwt.

The drop in the price and the volume of wool has taken a big slice off the value of wool exports, according to Harold Manttan from the Australian Wool Network.

"About 1.4 million bales of wool were sold around Australia which grossed about $2 billion, but that is a lot less than last year when prices and production were higher," he said.

"We're basically a billion dollars down, which is a lot of money not coming into the rural sector."

The decreasing size of the flock is reflected in the small size of the clip.

"It's the least amount of sheep shorn since early 1920s," Mr Manttan said.

International factors driving down the wool price

Normally a shortage of supply would lead to a rise in the price, and , but a number of things have reversed that trend.



Chris Wilcox, head of Wool Selling Brokers of Australia, said the first blow was the US-China trade dispute.

"The US imposed additional duties on wool clothing imports from China, and most of that wool comes from Australia," Mr Wilcox said.

And then the pandemic hit world trade.



Wool grower and president of the NSW Farmers Association James Jackson said the demand for woollen clothing evaporated as the virus spread.

"All the discretionary items have taken a hit with the worldwide shut down," Mr Jackson said.

"You don't go out buying suits and high end clothing in this situation. A lot of the shops are shut and the wool market has certainly collapsed."

China dominates processing sector

China bought 77 per cent of the wool sold this financial year.

That figure went up to 93 per cent in April as processing plants in Czechoslovakia and India were closed due to the pandemic.

Harold Manttan said China is playing an increasingly important role in the wool market.

"Without the Chinese we're certainly in a lot of trouble," he said.

NSW wool and lamb producer Ron Campbell is concerned about the dominance of China, the lack of competition, and a growing stockpile as growers withhold their wool during this period of low prices.

"Unless you're a large producer that can forego the income for 12 months the numbers can escalate, and when all that wool comes on the market the demand is not there," he said.

He has seen it all before in the wool market but is optimistic about the future.

"The world will realize that if the numbers go too low they're not getting that great wool fibre," Mr Campbell said.



Fat lambs

As the wool price continues to slide more wool producers are focussing on selling fat lambs to meat processors.

Farmers with medium fibre merinos will do well, according to Mr Campbell, because those sheep can be sired with a meat producing breed of ram and used to produce fat lambs as well as a decent wool clip.

"As people start to realise the value of sheep, not only for wool but also for other parts of the management of their farm, they will expand and renew a lot of their infrastructure," Mr Campbell said.



James Jackson agrees.

"Merinos are certainly a good base for breeding meat sheep, so there's all sorts of options for wool producers," he said.

With the meat export industry still going strong, despite the pandemic, the .

"Mutton prices have jumped and a lot of people have a stake in both wool and the meat industry," Mr Jackson said.

Mr Manttan is also hopeful that things will improve.

"The way that mutton are selling, and everyone wanting protein around the world, if we can keep the rain coming the sheep industry will be a pretty good one," he said.


- ABC

© ABC 2020

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