Confidence in future of industry

An end to dry seasonal conditions across southern WA could signal a turnaround in the fortunes of the State’s woolgrowers.

When the global wool trade gathered for its main annual conference in China’s Hangzhou Province this month, downstream processors were upbeat about demand prospects for the fibre and indicated they could absorb current high price levels.

There was also some suggestion of further potential market upside.

Coupled with the arrival of good winter rains this year, a favourable market outlook could prompt WA farmers to boost wool production, according to Primaries of WA managing director Matthew Pedersen.

Mr Pedersen, Carl Poingdestre, also from Primaries, and WA-based wool buyer Tony Price, of Swan Wool Processors, last week returned from the International Wool Textile Organisation (IWTO) meeting in China, which had the theme ‘Sustainability Guaranteed by Wool’.

They said the mood among the 300 delegates from 38 wool-producing and processing countries was positive, and all sectors of the supply chain had expressed strong confidence in the future of the industry.

Mr Pedersen said there was heightened awareness that global raw wool stocks were at historically low levels and demand during the 2010–11 season had outstripped supply.

Buffer stocks of stored wool in Australia were almost depleted.

“Each wool-producing country said it was facing the same pressures of competing land uses and high land values that would restrict efforts to boost production levels in the short to medium term, ” he said.

“But it appears the global decline in wool production experienced during the past 10 years has started to level off and that is a big confidence boost for downstream processors heading into next season. And, just as Australian wool producers have boosted efficiencies, so too have processors with major restructuring and re-locating of operations.”

Mr Poingdestre said mainland Europe was experiencing a resurgence in wool-processing activity.

He said German companies in particular had indicated at IWTO that the wool market had potential to rise further in the longer term.

“The wool market is once again becoming vibrant and competitive and that should boost the confidence of Australian woolgrowers, ” he said.

Crunch time will come about mid-October when the major world trade fairs are held. These will highlight retail trends and further clarify whether this year’s raw wool price rises can be passed along the chain to retailers and consumers.

This season, Mr Pedersen said early stage processors were able to mix fresh wool with older stocks to lessen the impact of higher auction prices to retailers, which were yet to feel the full impact of market movements.

He said world trade fair trends and expected lower volumes of wool availability for season 2011–12 (with no buffer stocks) would determine prices after October and the ability of retailers and consumers to absorb any market upside.

“A big positive is that wool is very much in vogue with consumers because of its natural fibre attributes, ” he said.

“IWTO members said they were pleased that Australian Wool Innovation was actively promoting wool again.

“High cotton and oil prices mean wool remains competitive and has not priced itself out of the market.

“It is also benefiting from innovations in next-to-skin and active wear.”

Mr Pedersen and Mr Poingdestre visited a range of wool processors in China after the IWTO meeting.

They said since their last visit in 2008, the country had invested heavily in expanding processing capacity and upgrading machinery.

They said Chinese processors recognised that wool producers needed to run viable businesses and be rewarded for their breeding efforts.