Wool production

Australian wool production is forecast to drop by 9.3% during 2025-26, to 373.4 kilotonnes. This is largely due to a wool sheep destocking after back-to-back failed springs and the droughts in south-west Victoria and parts of SA and WA. According to Meat & Livestock Australia, heavy culling drove the national flock down 7% to a projected 73.2 million by June 2025. Robust mutton and lamb prices, high shearing costs and federal moves to phase out live sheep exports are prompting many growers to shift away from wool production, ensuring continued supply pressures for the coming season in 2025-26.

Several factors influence wool production. Weather conditions can have a major influence, with above-average rainfall typically correlating with increased wool production. In addition to a typical increase in the national sheep herd, wool cut per head also tends to grow during periods of superior pasture quality. However, wool production strongly decreased over the two years through 2019-20. Drought conditions on Australia's east coast, combined with hazards like bushfires, presented ongoing difficulties for sheep farmers. Adverse conditions resulted in many farmers culling herd numbers as feed prices skyrocketed.

The relative prices of lamb and wool also determine wool production, as they influence farmer' decisions regarding their flock. When lamb prices provide better returns than wool prices, farmers typically focus on breeding and selling sheep and lambs for their meat, rather than their wool. Sheep breeds intended for meat production typically have lower wool quality and weight than sheep breeds intended for wool production, like Merino sheep. This means that when farmers focus on sheep meat production, the total production of wool typically declines. For example, the price of lamb surged over the two years through 2019-20. This encouraged many farmers to focus on meat production, reducing national wool output over the same period. Wool production was further restricted by a strong decline in wool prices over the two years through 2020-21. Even so, a strong rebound in wool prices prompted farmers to pivot towards wool production again during 2021-22.

Above-average rainfall over 2022-23 has significantly improved pasture quality. The national sheep herd tends to grow during periods of solid rainfall. Improved pasture conditions reduce herd maintenance costs, namely, stock feed. As a result, sheep farmers have undertaken flock rebuilds from 2022-24.

Shifting trends between synthetic fibre and natural fibre usage in products can also influence wool prices and encourage farmers to increase or decrease wool production. Strong competition from other wool-producing nations and the increasing substitution of wool for other textile materials have placed downwards pressure on Australian wool production over the past three decades. Overall, wool production is forecast to climb at a compound annual rate of 0.9% over the five years through 2025-26.