Wool prices have rebounded in early 2021 and the forecast is positive as a global COVID-19 recovery gets underway, ANZ says
Forecasts of Australia’s wool industry appear optimistic according to ANZ’s Agri Commodity Report, with the sector already projected for a strong year ahead.
Across the first quarter of 2021, the price of wool has increased, returning to a price last seen one year ago before they fell by 50 per cent from January to September 2020.
Currently, the price of wool sits steady at A$13/kg in April 2021; a stark contrast from the $8.50 it fetched last September – the lowest point the Eastern Market Indicator has fallen over the past year.
The report suggests that the demand for wool will be largely dictated by the northern hemisphere winter at the end of the 2021 calendar year which will have a major bearing on several aspects of Australia’s wool sector across the year.
ANZ Associate Director of Agribusiness Research, Madeline Swan, says European markets and the global recovery from COVID-19 will be large factors in the strength of the wool industry across 2021.
“The next Northern Hemisphere winter won’t be rolling around until the end of this year, however the world’s woollen mills and clothing manufacturers will already be doing their sums on the volumes of wool required to provide for that time when it comes,’ Swan says.
“As large European markets for woollen garments such as France and Italy continue to feel the impact of COVID lockdowns, suppliers are needing to look longer term.
“On current outlook, this could be to a time when national vaccination programs have reinvigorated economies and consumer behaviour, so garment manufacturers should start planning their supply chain processes accordingly.”
Overall, the forecast for the industry is positive. While the short and medium term wool demand is dependent on the economic conditions across the globe, ANZ expects the supply of Australian wool in the market to grow for at least the next five years.
The wool clip is also expected to increase, climbing by 1.7 per cent in 2020-21 to 288-thousand tonnes despite a five per cent fall in the number of sheep shorn. This result is largely due to the positive impact of sheep condition and wool yields of the good season.
A rise has been predicted in the overall levels of wool production, which is set to increase by over 20 per cent by 2025-26, however concerns have been raised given this could then lead to a surplus of domestic wool stockpiles to a level which could cause structural correction in the market.
Falling prices as a result of increased wool production could also see many wool producers move away from wool sheep.
Wool exports are likely to grow at the same strong rate as production however, which will limit the levels of end stocks.