China demand buoys woolgrowers
WA’s 6000 woolgrowers are reaping the benefits of a spectacular resurgence in the wool price, fuelled by insatiable demand from China and constrained supply from low sheep numbers.
The wool price has performed well over the past two years, but reached a milestone last week when the benchmark eastern market indicator broke through $20 a kilogram for the first time.
At this value, WA’s annual wool clip is worth $1.07 billion, up from $826 million in 2016-17, providing a major boost for regional WA.
Jeremy King, 47, a fourth-generation wool grower from Darkan, 200km south-east of Perth, has seen ups and downs in the industry, but is confident about the future.
Mr King and his wife Melinda run about 6000 breeding ewes and produce between 40,000kg and 45,000kg of quality 18-micron wool each year.
“Things got pretty bad in the 1990s — there were times when we wondered why we were still doing it,” Mr King said. “But my father, grandfather, and I have always had an affinity with merinos and we hung in there.”
The 1990s were the toughest, after the collapse of the reserve price scheme, which kept the price artificially high but led to overproduction.
Prices hit a low average of $5.10/ kg in 1998, well below the cost of production, causing many farmers to leave the industry, and the size of Australia’s sheep flock to shrink.
“Even in the tougher years, I was quietly confident the wool price would eventually rise, but I never dreamt it would reach anywhere near what it is now,” Mr King said.
Australian Wool Innovation chief executive Stuart McCullough said much of the lift was attributed to China’s rising middle class and their increasing disposable income.
China imports nearly 80 per cent of Australia’s wool. “The steady rise in demand and therefore price from existing and new markets such as sportswear give weight to the theory that current prices can last for some time to come,” Mr McCullough said.
Australian Association of Agricultural Consultants WA president Tim Johnston said low sheep numbers should remain for the foreseeable future.
National sheep numbers have fallen from a peak of 180 million in 1992 to about 70 million now.
“It is a slow process to increase sheep numbers and therefore wool supply,” Mr Johnston said. “When sheep prices are so good, surplus merinos are being sold to meat processors or live exporters.”
The world buys wool in US dollars and with forecasts the Australian dollar will stay relatively low, the exchange rate also boosts returns to growers.
And the strong returns are feeding through to regional WA.
Mr Johnston said more money was flowing through local businesses, as farmers reinvest in their businesses. “More farm inputs are being purchased from local retailers, and we are seeing unprecedented demand for new shearing sheds, shearing shed upgrades, as well as new yards and fencing,” he said.
“The demand provides employment opportunities and supports local businesses.”
Rural Bank’s Ag Answers division said the average sheep farm cash income was expected to be 35 per cent higher this financial year than a year earlier, which was already a 20-year high.
Mr King, who runs Rangeview merino ram stud, said good wool prices meant his family were able to pay off debt and upgrade infrastructure. They could even expand their operation. Like all sheep farmers, the Kings are concerned about the potential closure of the live sheep export market.
“It hurts me to say it, and I really hope it isn’t phased out, but if we do lose the live export markets, at least we have never been in a stronger position than now to have that taken away,” he said.
Jeremy and Melinda King from Rangeview Stud near Darkan with their children Erin, Tom and Gemma.