China ban boon for Australia

Zach RelphCountryman
Wool economist Chris Wilcox believes longer-term prospects for wool demand would hinge on global economic conditions
Camera IconWool economist Chris Wilcox believes longer-term prospects for wool demand would hinge on global economic conditions Credit: Countryman

Analysts are uncertain how long Australian woolgrowers will ride the wave of positive prices generated by China’s decision to suspend wool trade with South Africa after the outbreak of a serious livestock virus.

Cape Wools SA, South Africa’s peak wool industry organisation, confirmed last month China had stopped importing wool from the African country following a foot-and-mouth detection on its main- land in January.

The announcement sparked a sharp reaction in Australia, with the Eastern Market Indicator closing 59¢/kg higher at 2027¢/kg clean on February 22.

It remains unknown how long China’s temporary embargo on South African wool imports will be enforced.

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However, Rabobank senior analyst Angus Gidley-Baird said in the agriculture financing company’s latest report, released last Thursday, he was hopeful the ban would continue to bolster the greasy commodity’s price on Australian soil.

“While it’s not certain how long the China suspension of South African wool imports will last, the limited Australian supply will continue,” he said.

“Rabobank expects this will keep some strength in wool prices in the near future.”

Foot-and-mouth disease is a highly contagious livestock disease which poses a multibillion-dollar threat to Australia.

According to the Federal Department of Agriculture and Water Resources, a small foot-and-mouth disease outbreak in Australia could cost about $7.1 billion if contained in three months.

National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said South Africa’s wool halt with China caused an immediate price improvement in Australia.

Mr Wilcox said Australia’s strong Merino wool demand alongside limited wool production, with bales offered down 13.7 per cent to 1.12 million bales for the season as at March 1, was unprecedented.

“It is a really interesting position that the global and Australian wool markets are in,” he said.

“It really is unprecedented so it is unclear what will happen.”

Last month, DAWR flagged foot-and-mouth disease and African swine fever as major threats to the nation’s agriculture sector.

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