Wool

  • GVP $1.05 billion est. Up 24% year-on-year.
  • Consumer demand for wool increased post COVID related movement restrictions.
  • Exports up 52% on 10-year average to $706 million.
Consecutive La-Nina influenced seasons supported wool producers sheep flock rebuilding, following the drought years of 2017 to 2019. While sheep flocks still remain below pre drought levels, the increase has been more rapid than for cattle, with increased wool production year on year as a result. The improved conditions aided higher wool cut per head and fleece yield, but conversely average wool microns and vegetable matter also increased allowing growers to seek premiums for finer wool types, as well as Responsible Wool Standard (RWS) accredited wool. The Eastern Market Indicator (EMI) broadly traded sideways and within a relatively tight range throughout the year, after recovering from 2021 prices which were impacted by a drop in demand relating to COVID. Demand patterns changed over the course of the financial year, with post COVID travel bans, and lockdowns in most jurisdictions allowing greater movement of people and as a result increased intermediate and final stage demand for finer micron wool types. A combination of increased wool receivals and a higher weighted average wool price have driven GVP 24% higher to an estimated $1.05 billion in GVP.

Production

NSW Avg. Micron, VM & Yield 208

  • Micron
  • Yield (RHS)

NSW Avg. Micron, VM & Yield 208

  • Micron
  • Vegetable Matter (RHS)
Seasonal conditions continued to improve, which allowed confidence for producers to continue the sheep flock rebuild activities. Shorn sheep numbers were forecast to increase by 4.7 million head to 71.6 million head nationally, which is the first increase in shorn sheep numbers for four years. 209 NSW is forecast to account for 24.6 million head, which would represent approximately 34% of national shorn sheep numbers, although the relative year on year growth was more subdued compared to other major wool producing states. 209 Improved conditions have had various benefits outside of increased carrying capacities. The average wool cut per head continued to increase, and is forecast at 4.6 kg/head, while yield has continued a steady improvement from the lingering drought conditions of 2019-20. 208 209 Offsetting this has been a general increase in wool diameter with the average micron increasing 2.5% since 2019-20 to 20.6 microns in 2021-22. Vegetable matter content has also increased owing to the plant matter that typically accompanies better seasonal conditions. 208 Overall the higher number of sheep shorn, wool cut per head and yield also translated into higher wool receivals. Overall wool receivals were up 9.2% year on year to 115.9 thousand tonnes. 210 This represented an 3.8% increase on the 10 year moving average, but still well down on the wool receivals of the 90’s and two decades prior. 210

Price

Unlike many other commodity markets, the wool market has remained relatively subdued over the course of the financial year to June 2022. This comes after a significant slump in demand related to COVID which bottomed in September 2020, followed by a moderate price recovery to May 2021. The 2022 financial year saw the EMI trade in the tightest range since at least early 2000’s, with the range less than 100 c/kg. 215 In inflation adjusted terms (in 2022 dollars), the EMI has reverted back to a longer term trading range of 1,000c/kg to 1,800 c/kg after breaking to the upside in 2017. In real terms these levels are well below historical peaks in 1946 to 1950, 1973 and more recent 1988 levels. 216 Fine wool to coarse wool price spreads have also increased substantially over the course of the year and reached levels similar to 2018 in absolute terms, but in percentage terms the spread has far exceeded these levels. Broader wool types overall finished the year lower with 28 and 30 Micron Price Guides (MPG) down 16% and 17% respectively, while finer wool types finishing the year higher with 16.5, 17 and 18 MPG up 7%, 8% and 5% respectively at year end. 215 The initial and potentially short lived global economic recovery was responsible for driving demand for fine wool, with Merino lots below 19.5 microns finding more buyer interest than broader crossbred wool types in recent months. 217 Responsible Wool Standard (RWS) of both Merino and Crossbred wool types fetched substantial premiums throughout the year with fluctuating supply from the Southern Hemisphere wool producers and sourcing issues being the key driver of premiums offered. 218

AWEX Australian monthly average micron-price guide 215

  • All Wool
  • 17um
  • 19um
  • 21um
  • 26um
  • 30um
  • FY 2021-22

Trade and Macroeconomic Conditions

NSW Export earnings rebounded 52% to $706.1 million, although noting that a large portion of NSW wool moves through Victorian wool brokers and the Port of Melbourne, and are therefore not captured in NSW wool export statistics. The improved export earnings were the result of government vaccination programs which gained traction in many countries in late 2021 and early 2022, allowing international borders to be re-opened and importantly for the wool sector, the end of lockdowns. This also meant a partial return to office based work, and as a result demand for woolen apparel products grew, while woolen suit demand also increased substantially in large consumer markets like the EU and the US. 221

A combination of strong economic recovery in the US, followed by inflationary pressures and rising interest rates saw the US dollar gain ground steadily over the Australian Dollar (AUD) during the course of the year. The AUD opened the year at approximately 0.748 AUD/USD, to ultimately close the year at approximately 0.701 AUD/USD, which lent support to the wool market. 234 Offsetting this was the higher shipping costs incurred by exporters, with reports ranging from 150 cents/kg to 200 cents/kg higher, with these costs either absorbed by exporters or passed on at auction. 218 China once again was the predominant export destination for NSW wool exports, making up 83% of exports by value. 35 Australia continued to gain Chinese wool import market share which increased to 63% in volume terms and 79% in value terms for the 2021 calendar year in volume terms. This increase in market share came at the expense of key competitors New Zealand which declined 2 percentage points year on year, and South Africa which declined 3 percentage points year on year respectively. 46 However it was our second largest and premium market being Italy, which saw the strongest recovery with exports increasing 321% year on year to $50.2 million. 35 While this is still well below peak export levels to Italy, these exports serve as a good indicator of the relative improvement in the global economy and increased consumer demand for high end wool products.

Exports by wool type reverted back to longer term trends with Super-fine to Fine-Medium wool types accounting for approximately 85% of all exports by volume, which is down 2 percentage points on the 10 year moving average. 35 Medium and coarse wool exports recorded the strongest export growth rates year on year, while super fine and fine wool types boosted exports volumes 5% above the 8 year moving average. 35 This follows three years of reduced exports, with drought impacting supply leading into 2019-20, and COVID lockdowns and processor slowdowns impacting both intermediate and final stage demand in 2020-21.

NSW Wool Exports By Micron Range 35

  • 19 Um and Finer
  • 20 Um To 23 Um
  • 24 Um To 27 Um
  • 24 Um and Up
  • 28 Um and up
  • Other

Outlook

La-Nina conditions that persisted into June 2022 helped to set up a good pasture base heading into winter. Despite the La-Nina conditions dissipating over winter, generally above average rainfall and good seasonal conditions are expected to underpin continued sheep flock rebuilding activities. Nationally shorn sheep numbers are forecast to increase by 4.7% yoy, a lower rate than forecast in 2021-22, and as a result wool production is also forecast to rise by 4.9% yoy. 209 If accurate, this would indicate a strong flock rebuild, with the flock just 2.3% lower than the pre-drought peak of 76.8 million shorn sheep in 2017-18. 209

Global economic uncertainty is likely to continue to continue to drive uncertainty within the wool industry, with consumer confidence slipping from the initial highs of the post COVID stimulus influenced levels. 221 Strong inflation both domestically and abroad is influencing central bank decisions around monetary policy and resulting in interest rate rises to keep inflation within target bands. Additionally, the US is beginning to undergo a second phase of Quantitative Tightening (QT), which will effectively reduce the liquidity of cash into the US economy and reduce the US Federal Reserve’s balance sheet. 222 At the time of writing there is a strong possibility of the US slipping into recession, which could easily be mirrored by other large consumer markets such as the EU and Asia. Inflation, rising interest rates and fears of a recession are ultimately impacting consumer confidence, which ultimately points towards the possibility of a drop in retail demand, with the wool market likely to feel these pressures directly.

sheep

Stronger Primary Industries Strategy

On-Farm Energy Pilots

NSW DPI is currently implementing 7 pilot projects across 8 sites to demonstrate innovative technologies and practices to improve on-farm energy efficiency, energy security and productivity and to reduce on-farm energy use, costs and emissions. The pilots are being implemented at farms located across NSW in intensive sub-sectors including dairy, horticulture and feedlots. A total of $3.96 million dollars has been invested by DPI and the pilot proponents.

Strategic Outcome

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Carbon Neutrality and Climate Resilience
project
A rigorous evaluation process was undertaken to select proponents to participate in the pilot projects. This commenced with an initial public request for proposals in September 2019 for which 21 proposals were received. The proposals were evaluated by an independent project steering committee and 11 proposals were selected to have expert feasibility studies undertaken in the first half of 2020. The results of the feasibility studies were evaluated by the steering committee against merit criteria and seven proposals were selected to proceed to pilot projects.

Technological solutions demonstrated in the pilot projects include: solar thermal chilled water storage and control systems for milk cooling; electrification of irrigation pumps powered by a solar photo voltaic tracking system raised above the ground to enable livestock grazing in the same location; solar photovoltaic and battery storage systems; electrification of LPG and diesel fuelled equipment; and, peer to peer energy trading. Once completed, the pilots will enable the dissemination of case study information to the sector more broadly and reduce risks associated with the early adoption of innovative energy technologies in agriculture. Monitoring and evaluation of the pilots is on-going with case studies and supporting documentation of the effectiveness of the pilots currently being produced

Project summaries:

Pilot: Avondale farm

Pilot project: Electrification of grain mill; automation of grain mill; off-grid 100kW single axis tracking solar photovoltaics (PV) + 264 kWh lithium ion battery + 150kVA backup genset

Site location: Rowena

Pilot: Dairy NSW (2 member farms)

Pilot project: Solar powered chilled water storage and control system for milk cooling

Site Locations: Jones Island, Wingham

Pilot: Farrer Memorial Agricultural High School

Pilot project: Electrification of irrigation pumps and 60kW raised single axis solar PV tracking system to power irrigation pumps and demonstrate Agrivoltaics

Site Location: Calala

Pilot: Haddon Rig Stud

Pilot project: Grid connected solar PV with a battery backup system to supply electrical equipment to three independent electrical systems and improve reliability of electricity supply on site

Site location: Warren

Pilot: Pecora Dairy

Pilot project: On farm energy generation with solar panels, flow batteries and peer to peer energy trading; electrification of LPG fuelled equipment

Site location: Robertson

Pilot: Rosnay Organic Wines

Pilot project: On farm energy generation with solar panels, flow batteries and peer to peer energy trading; electrification of diesel fuelled equipment

Site location: Canowindra

Pilot: The Pines

Pilot project: On farm energy generation with solar panels, flow batteries and peer to peer energy trading

Site location: Kiama

Website and further details: https://www.dpi.nsw.gov.au/dpi/climate/energy/clean-energy/on-farm-energy-pilot-projects