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Beyond the Bale : March 2017
0 300 600 900 1,200 1,500 2016/172015/162014/152013/142012/132011/122010/112009/102008/092007/082006/072005/062004/052003/042002/032001/022000/011999/001998/991997/981996/971995/961994/951993/941992/931991/92 EMI AUS EMI US 850 900 950 1,000 1,050 1,100 1,150 1,200 1,250 1,300 1,350 1,400 1,450 800 Feb 2015 Jun 2015 Oct 2015 Feb 2016 Jun 2016 Dec 2016 Oct 2016 EMI AUS EMI US MARKET INTELLIGENCE REPORT WOOL PRICES IN HISTORICAL PERSPECTIVE Figures from the Harvest Database are derived using adjusted data to reflect rebasing of indicators. From 1991 to 2001 the price of wool was generally supressed due to the hangover from the abandonment of the reserve price scheme (RPS) in 1991. A stockpile of 4.7 million bales had accumulated prior to the cessation of the RPS and had to be disposed of which took to around the year 2001 to do so. The seasonal average moved from just 671ac in 1991 to 784ac a decade later in 2001 representing a yearly average rise of just 1.45%. The next 10 years saw prices move just 1% yearly from the 2001 price of 784ac to the 872ac mark at the start of 2010. The first decade of the millennium had a run of events and crises that shook the global economy. This included the terrible events of September 11 2001, the stock market crash of 2002, the SARS virus global epidemic in 2003 that mainly affected China, the global war on terror, the sub-prime housing collapse of the US from 2007 and the resultant Global Financial Crisis. These negatives that faced the wool industry through the period of 1991 to 2009 contributed therefore to production losses in terms of the national sheep flock and wool clip. Whilst there were some good years for income through that period, at just a raw 1 to 1.5% increase of annual wool value, wool, as well as sheep meat, was simply underperforming against all profit indicators and the Consumer Price Index which drove landholders to alternative on farm enterprises. Production and sheep numbers stabilised from 2010 to 2015, but exceptionally good meat prices and widespread economic advice pointing to food over fibre, has led to more growers joining to meat breeds (crossbreds). Sheep numbers have remained somewhat similar, but the percentage mix of the breeds of animals being farmed has altered to represent far more dual purpose or crossbred. Thus, figures are showing lower volume of wool produced as the meat sheep in general cut much less wool per head (around 3.5kgs for a retained crossbred (ewe) compared to around 6kg for a medium wool Merino). From 2010 to today there has been a significant upswing in wool prices, resulting in an annualised increase in returns of 4.3% or a compounded 35% increase in wool values over the past 7 years. The gains in themselves are significant, but what is more compelling, is the manner the prices have chartered. Levels have consistently and steadily improved season on season and is strongly indicative of demand overtaking supply as the key price influencer. EASTERN MARKET INDICATOR IN CENTS/CLEAN KG – 1991 TO 2017 seasonal average prices EASTERN MARKET INDICATOR IN CENTS/CLEAN KG – PAST 2 YEARS During the past few years prices have been rising at a healthy rate. Furthermore, it has been at a relatively consistent rate, without large peaks and troughs adding weight to the sustainability of the price. MARKET INTELLIGENCE 51
In the Shops - March 2017