Australia can’t capitalize on record wool prices due to shortage of shearers

SYDNEY — Sheep farmers in rural Australia waited more than half a century for wool prices to come roaring back, only to find there aren’t enough shearers to trim their golden fleeces.

“Once upon a time you could go down to the local pub and arrange for some fellas to come in and start almost immediately — those days are gone,” said Alan Rae, a wool producer in Bungunya, a town of about 200 people in Queensland state.

The industry shackles mean suppliers in Australia, which provides about 90% of the world’s exported fine-wool used in clothing manufacturing, are struggling to meet demand. That has forced some garment makers to sell at a loss or reduce their wool content.

Prices for very fine wool used for clothing hit a record high A$ 18.30 per kilogram ( kg.) this week, thanks in large part to ferocious demand from Chinese garment makers.

That’s more than three times the price during the early 1990s when a massive oversupply led the government to offer indebted farmers A$2 for every sheep they shot.

The high prices coincide with the peak shearing season in some parts of Australia, but some in the industry think things are as good as they will get.

“My concern for the future of the market is how opaque the Chinese market is,” said Phin Ziebell, an agribusiness economist at National Australia Bank, who expects prices to fall to around A$16 per kg. by the end of the year.

“It was chilly today so I put on my A$ 50 ($ 40) Uniqlo jumper, which is super-fine Merino wool. I can’t see how that product can be manufactured at the price levels we have today.”

There are early signs of a standoff between buyers and sellers emerging at wool auction houses, according to the country’s dominant wool storage and export house AWH. Weekly passin-rates have topped 10% in some states, double usual levels.

“Some of the sellers are putting too high a reserve on their wool and the buyers are obviously trying to keep the rate down,” said AWH Chief Executive Michael Jones.

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.

“We had some wool that had been sitting here for 14 years,” said Jones. “It’s high value wool that farmers had put in and it was like their (pension) fund, sitting there paying a low storage rate. Even that is now being cleaned out.”

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 popular in Europe.

That demand has now extended to Asia, and China in particular.

But high wool prices are having an impact on clothing makers, according to woolgrower body Australian Wool Innovation (AWI).

“There are those selling fine wool products as loss-leaders and others blending down, but we also have people putting wool into their garments for the first time replacing synthetic materials,” said AWI Chief Executive Stuart McCullough.

While prices remain susceptible to a China- led pullback, there is less danger of oversupply. —