Domestic price of wool

IBISWorld expects that the domestic price of wool will fall 9.7% during 2023-24 to hit 1,175.0 c/kg. This follows a notable drop the year before. Cost-of-living concerns brought about by interest rate hikes and inflationary pressures have placed pressure on disposable incomes and subdued demand for wool this year. This has been apparent as the demand for textiles inches downward in the current year. Additionally, according to ABARES, domestic wool production is projected to climb during the year, adding to oversupply concerns. Overall, with demand falling against rising wool supply, prices have diminished in 2023-24.

Domestic wool prices fell substantially over the two years through 2020-21. This was triggered by a surge in premium, superfine wool production during drier years early in the period that has continued through to 2023-24. Wool prices bounced back in 2021-22 due to rising demand for textiles. Given its status as a luxury fibre, woollen apparel is highly sought after in China and advanced economies. This is despite recent disruptions to China's production lines causing some production delays for their textile manufacturers. Strong demand from the United States and the European Union for Chinese manufactured wool products contributed to last year's price rise. Australians with more disposable income in 2021-22 were able to cash in on expensive suit and other clothing purchases that they had been holding off from, as many returned to work. Nevertheless, Australian wool production has been in under intensifying pressure due to fierce competition from synthetic textile fibres.

Heightened super-fine wool production and uncertain global demand conditions including changes to tariffs on textiles and garments exported from China to the US have reduced global prices for production inputs like wool. Moreover, the global economic disruption following the COVID-19 pandemic and associated lockdowns, particularly in China, weakened downstream demand for wool from consumers and manufacturers. Many office-based workers around the world were able to work from home, eroding the sales of suits and other wool-based business attire. Overall demand for wool has declined in recent years, exacerbated by the fall in demand from garment producers, due to the global economic downturn.

Sheep farmers shift their focus between wool and sheep meat production according to the relative prices of wool and lamb. When lamb prices are more valuable than wool prices, farmers focus on sheep meat production, subduing supplies of wool. This trend tends to indicate an upcoming spike in wool prices. However, this relationship has changed slightly following adverse weather conditions. Increasingly volatile weather conditions ranging from low to high levels of rainfall have intensified the difficulty of planning out feed and grazing strategies for sheep farmers. These conditions have constrained the sizes of sheep flocks that can be supported on farms. Overall, IBISWorld forecasts that the domestic price of wool will decline at a compound annual rate of 9.5% over the five years through 2023-24.