June EMI close price up36%
to 2,056 c/kg
Exports hit record high of $866m, up29 % yoy
The industry went from strength to strength, with blistering prices consistently breaking records over the course of the year. As a result the industry was one of the highlights in 2017–18, with an estimated industry value of $1.32 billion growing by 20% in the 12 months ending June 2018, and more than offsetting a slight decline in production.
Production was down marginally with wool sales recording a 1.2% drop to 118 thousand tonnes14, which was impacted by an estimated 3.5% slide in the wool cut per head. Less favourable seasonal conditions across much of the state have resulted in lower fleece weights and increased sheep turnoff despite most growers’ intentions to maintain or increase ewe flocks per recent grower surveys32.
Nominal wool prices broke records on a regular basis over the course of 2017–18. The Eastern Market Indicator (EMI) ended the fiscal year at 2,056 cents per kilogram, which was 36% higher than year ago closing levels. The average price over 2017–18 was 1,723 cents per kilogram, 22% higher than the previous year.
While all wool type prices grew strongly, the fine and superfine categories underpinned demand as demonstrated by the growing premiums received for these types. Despite continued price growth in all micron ranges, the fine wool premiums began retracting in the second quarter of 2018 as buyers started to substitute coarser wool types for the more expensive, finer wools33, 34.
Demand flourished, with buyers from China showing strong interest in wool auctions over the past two years. A booming middle class in China and rising household incomes fuelled demand for luxury goods. In fact, Chinese consumers are estimated to account for 75% of the growth in luxury spending, including on Merino wool items35.
The export market is predominantly China, which accounted for approximately 83% of the value of wool exports, half of which is estimated to be consumed within China. Exports of wool to China rose by 34% and to all other global markets by 7% year-on-year. While the traditional markets of Italy and the Czech Republic remained significant, demand from these countries remained relatively steady compared to the 5 year averages54, 35.