Sheep farm income to hit 20 year high in 2018

Australia’s woolgrowers should continue to enjoy strong prices in 2018 as market fundamentals further boost the sector, according to Rural Bank’s Australian Wool Annual Review.

2018 is already a record breaking year for wool prices, with the Eastern Market Indicator (EMI) reaching a nominal all-time high in early March of 1830c/kg, continuing 2017’s extraordinary streak.

Wool exports rose 20 per cent in value to $3.65 billion and export volumes rose by 6pc, in what can be only regarded as a bumper 2017.

The Australian Wool Annual Review - developed by Rural Bank’s Ag Answers division - clearly indicates a trickle-down effect to farmers, with the average sheep farm cash income expected to be 35pc higher than the average for last financial year - a 20 year high.

Farm Management Deposits for sheep businesses have also increased by more than $100 million in the past four years, as wool producers take advantage of successive good seasons.

Simon Dundon, Head of Sales Agribusiness, said these positive outcomes are expected to continue for wool farmers for at least the next 12 months.

“Wool sellers can expect another year of strong prices as international demand continues to grow,” he said.

“Last year, China imported 77pc of Australia’s wool with a 24pc increase in export value for the year, while export value to Italy also increased by 40pc.

“As value growth has been focused on finer grade wools and our international competitors predominantly supply coarser wool, we expect prices to remain strong for Aussie wool.

The report also revealed the average number of bales sold at auction has increased to 42,000 per week.

Mr Dundon said this high auction clearance rate combined with a steady supply, increasing consumer demand and a competitive market for other commodities, should further boost wool prices.

“Cotton‘s high price - a potential substitute for wool - has continued to help wool’s competitiveness, as has the relatively low Aussie dollar,” he said. 

“These unique market conditions have encouraged an increase in production with the wool clip 1.4pc larger in 2017/18 - a third successive year of growth - and the flock size now expected to hit 76.6 million sheep in 2018/19.

“With median average rainfall generally forecast across wool growing areas, and the EMI expected to remain above 1800c/kg for the year, Australia’s wool producers are set for another excellent year.

“This also appears to mark the beginning of a reversal of the 20-year trend of declining wool production in Australia.”

The full Australian Wool Annual Review can be accessed at www.ruralbank.com.au/wool