Merino Annual: Prices long way behind the Korean War boom

Merino Annual: Wool prices long way behind the Korean War boom


Sheep
HIGH DEMAND: Colleen Walsh and Jed Herbert, both of Forbes, skirt a Merino fleece during shearing in a local shed. The drought has added plenty of dust to many fleeces. Photo: RACHAEL WEBB

HIGH DEMAND: Colleen Walsh and Jed Herbert, both of Forbes, skirt a Merino fleece during shearing in a local shed. The drought has added plenty of dust to many fleeces. Photo: RACHAEL WEBB

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Comparisons with prices during the short-lived Korean War wool boom in the early 1950s surfaced when the eastern market indicator (EMI) soared over $20 a kilogram clean earlier this year.

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Comparisons with prices during the short-lived Korean War wool boom in the early 1950s surfaced when the eastern market indicator (EMI) soared over $20 a kilogram clean earlier this year.

But you get a different story if auction prices in the boom 1950-51 wool selling season are compared with today’s returns using the Reserve Bank of Australia’s pre-decimal inflation calculator.

The 1950-51 national auction wool cheque was worth £636 million or an astonishing $27 billion in 2017 dollars.

Prices in 1950-51 averaged 144 pence a pound greasy or $55 a kg greasy in today’s money. No wonder woolgrowers back then went on a spending spree.  

Read Merino Annual here.

Growers in 1951 voted overwhelmingly against a reserve price scheme but the debate continued and a floor scheme was implemented during a price downturn in 1974. 

When the federal government finally pulled the rug from under the struggling wool floor price scheme in February, 1991, growers were left with a $2.7 billion debt and a 4.6 million bale stockpile.

Selling down the stockpile inflicted more than a decade of pain on growers who could finally breathe a collective sigh of relief when the last bale was donated to Geelong’s National Wool Museum in April, 2002.

Some growers at the time probably believed the whole industry belonged in the museum.

Fast forward to 2018 and the Australian wool industry has been pulled into a new era by China’s growing appetite for natural fibres like wool.

China’s importers now take 75-80 per cent of the national wool clip with a rising percentage of their imports processed into luxury clothing for the country’s growing band of well-heeled consumers.   

Read Merino Annual online.

Read Merino Annual online.

China’s cashed-up and swelling middle classes are eagerly snapping up fine quality woollen garments which in turn has lifted Australia’s wool auction market and injected new confidence among growers.

China has 1.4 billion people and an economy growing at around seven per cent a year. Its wool imports from Australia have grown from 21 million kgs in 1980 to 271 million kg in 2017 (valued at about  $2.759 billion).

The national commodity forecaster, ABARES, is tipping wool prices will rise further in 2018-19 on the back of an ongoing imbalance between demand and supply of finer wool.

In early predictions ABARES forecast the EMI will average a healthy $19.90 a kg clean in the new selling year. Continuing drought conditions in NSW may put even more pressure on supply as the year unfolds.      

The Sydney wool auction room in 1927. Buyers from all around the world scrambled to buy our golden fleece.

The Sydney wool auction room in 1927. Buyers from all around the world scrambled to buy our golden fleece.

Also helping underpin wool demand and prices has been stable flock numbers which have been pruned from almost 181 million shorn in 1991-92, the year the wool reserve price scheme was axed, to around 73m shorn during each of the past three years.

Annual production has also tumbled from 801 million kgs greasy in 1991-92 to around 340m kg greasy in 2017-18.

The EMI averaged 1729c a kg clean (1337c greasy) during the 2017-18 selling season which was 16pc lower than end-of-season prices.

NSW remains Australia’s biggest sheep state with a flock of around 27 million.

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