Keep the best, sell the rest

Growers holding on to wool could be waiting until 2021 for a market upswing

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Tamworth wool grower Greg Drain with his broker, Tim Drury of Jemalong Wool (also on our cover). Mr Drain is storing his high-quality fleece lines and selling his lower-yielding wool. Photo: Lucy Kinbacher

Tamworth wool grower Greg Drain with his broker, Tim Drury of Jemalong Wool (also on our cover). Mr Drain is storing his high-quality fleece lines and selling his lower-yielding wool. Photo: Lucy Kinbacher

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Wool growers decide whether to store or sell.

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The wool market has dropped by almost 1000 cents a kilogram in the past 12 months, the sharp fall forcing growers to decide whether to sell, or hold on until the market recovers.

Jemalong Wool regional manager, Tim Drury, Tamworth, said his region was seeing a lot more growers than usual storing their wool.

"Traditionally wool growers find it hard to accept dramatic market falls like we've had. The reason is people usually shear every 12 months, so they sell their wool one year and they get near record prices, then 12 months later they go to sell their wool and it's half what got the year before," he said.

"A lot were also forced to sell stock last year because of the drought, and even though they've had the prospect of little income and big expenses, because of the livestock sales, cash flow might not be as big an issue.

"Wool is something they can hang on to for a while."

Growers could be storing wool until 2021

But, just how long can they hang on?

Australian Wool Innovation director and wool broker, Don MacDonald, MacDonald and Company, Dubbo, said the reality was if producers decided to hold, they are looking out to 2021.

"Most growers are realistic about the fact that the market's cheap, but by the same token there's a lot of uncertainty," Mr MacDonald said.

"There are no guarantees as to when the market will recover. What we're seeing is most growers are getting their wool tested, finding out what it's worth and then making a decision.

"At the moment 75 to 80 per cent of the wool is going through, being offered and largely being sold."

He said in the past couple of weeks the market had shaken off the worst effects of drought, with some higher quality wools being offered again.

"The market seems to have stabilised at around 1150c/kg and that's helped. Everyone gets a bit spooked when you see falls of $1 or $1.50 in a week."

With more people holding wool, Mr MacDonald said obviously the volume of unsold wool would increase, but this would be offset by the recent years of record low production.

Andrew Parkman, Young decided to sell all his wool as he thought low-yielding wool would be tough to sell even once the market turns around. Photo supplied.

Andrew Parkman, Young decided to sell all his wool as he thought low-yielding wool would be tough to sell even once the market turns around. Photo supplied.

Sell off of low-yielding lines 

He explained if growers were planning on holding wool, their best strategy would be to store high-yielding lines.

That was the thinking of sheep producer, Andrew Parkman, who runs about 5000 Merinos near Young.

"We sold all our wool three to four weeks ago," he said.

"After the tough conditions last year it had a lot of dirt in it and was not high-yielding.

"We were concerned that if this season does turn out as good as it's looking at the moment, there'll be plenty of high-yielding wool around next year.

"So even if we did hold it and the wool price went up, no one would be very keen to buy our low-yielding wool."

Tamworth producers, Greg and Noeleen Drain, said they were selling their lower-yielding wool and keeping their higher quality fleeces.

"We thought we're not going to give it to them," Mr Drain said.

"It's half what it was a year ago. Ordinary sort of wool is making a little bit of money, but very good wool is not making much.

"We got nearly 650c/kg for crutchings and 1300c/kg for fleece."

The Drains shore their 1200 Merinos in March and their wool is usually tested at 17-18 microns with yields of 75-78pc.

Mr Drain said at the end of the day, how long people could store their wool would depend on cash flow.

"You've got to pay the bills, you can't just say I'll pay you in 12 months time."

Louth grazier, Tim Murray, Idalia shears around 15,000 Merinos. He said they had tried to hedge their bets this year, taking forward contracts for 40 per cent of their clip in early-May for delivery in June and July.

"The rest of the strategy is to sell all the cheaper lines and hold the best fleece wools," Mr Murray said.

He said to sustain cash flow they had also kept the top 40 per cent of their wethers this year, for sale anytime from June to October.

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