Wool Marketing
The high quality of Australian wool means that the dominant share of produce is directed to the world’s clothing markets. Market prices, consumer preferences, competitive fibres and predictions for the global garment industry are factors that all influence the future of Australian wool.
Wool testing
Virtually all Australian wool is prepared for sale according to objective clip preparation.
Wool can be valued and bought with the aid of actual measurements for:
- Fibre diameter
- Yield
- Vegetable matter content
- Length
- Strength
- Colour
- Coefficient of variation for fibre diameter
- Fibre curvature
- Comfort factor
Measurement has facilitated computerisation and the expansion of electronic data processing and market reporting, and the establishment of auction and individual clip databases, which provide detailed information for all segments of the industry pipeline.
After testing, Merino wool is grouped into four types:
- Superfine -greasy fleece weight three to four kg, fibre diameter 19.5 micron or less, adult body weight 35 to 40 kg
- Fine - greasy fleece weight three to five kg, fibre diameter 19.6 to 20.5 micron, adult body weight 35 to 40 kg
- Medium - greasy fleece weight four to six kg, fibre diameter 20.6 to 22.5 micron, adult body weight 40 to 50 kg
- Strong - greasy fleece weight five to seven kg, fibre diameter 22.6 micron or more, adult body weight 45 to 55 kg
For more information on wool testing visit the Australian Wool Testing Authority website
Top of page
Global fibre market
Merino wool destined for world clothing markets (<16-24 micron) dominates the Australian wool supply.
This reflects both the adaptability of Merino sheep to Australia's many production environments and the higher value of finer Merino wool.
In 2000-2001 a total of 3,630,000 bales were tested: 87 per cent were 24 microns or finer (apparel), 18 per cent were 19 microns or finer, and 13 per cent were broader than 24 microns.
During the 1990s, supply of wools from Australia - the largest wool producer - and from most other regions fell, with the exceptions of China and New Zealand.
Wool's share of global fibre usage has declined significantly.
The world market for fibres has tripled in 40 years, but synthetics have accounted for most of the growth.
Wool use has been regular in quantity but small in market share; from near 10 per cent of fibre use around 1960 falling to 2.5 per cent in 2000 (or about five per cent of apparel fibre).
Top of page
Fibre use trends
Looking forward, the market picture is challenging for wool and for other fibres.
- Growth in the consumer market for textiles is slowing in both developed and developing countries.
- Consumer spending per capita is moving away from clothing to housing, transport and education.
- When apparel is purchased, consumers and retailers want better value in terms of price and quality.
- New synthetic fabrics are competing on both lifestyle performance and cost points.
Major influences on demand for apparel textiles and wool into the 21st century have been identified:
- The global apparel market is projected to grow at 2.5 per cent per annum - below the rate of expected four per cent world GDP growth.
- The largest clothing sector will continue to be casual leisurewear (70 per cent) though its share will decline a little as 'smart casual clothing', sports apparel and active leisurewear segments develop.
- Overall, the consumer wants it all. Key Apparel Purchase Drivers are no longer fashion designers but practical consumer demand for:
- Casual looks - relaxed, less structured but not cheap or uniform fabrics
- Comfort - looser fit, lightweight, soft handle, breathability and stretch
- Clothes that travel well - wrinkle resist, durable
- Convenience - total easy care
- Versatility - multi-occasions, seasons, individuality
- Value for money - a genuine product difference or a cheaper product
- Lifestyle brands - especially for young people, with confirmation of 'branding' as a global trend.
- Retail consolidation with the aim of forcing economies of scale, and so lower margins and consumer prices, will increase buying pressure on apparel. Prices will continue to fall in real terms for many basic apparel categories.
- The textile supply chain will have fewer players with access to consumers and more emphasis on value for money, product innovation, exclusivity, strategic alliances for co-operative product development, linked international expansion, global sourcing and promotion.
- Pressures on wool prices and costs will continue, with ups and downs. The forces reducing prices paid for apparel and textiles include: - consumer spending choices away from clothing, consumers seeking best prices, oversupply of fibre and excess processing capacity, retail competition, global manufacturing competition locating into lower cost countries, and falling trade barriers for suppliers and markets.
- Price and product demands are eroding the market share held by natural fibres. Greater economies of scale and industrial investment in new technology for synthetic fibres - polyester, acrylic and nylon - have enabled volume growth through price discounting, particularly in Asia.
Top of page
Future consumers
Young people dominate discretionary apparel expenditure globally. Young adults stress price and performance rather than textile fibre. They associate natural fibres with quality, but branded 'performance' products are further increasing the appeal of man-made fibres (Tencel®, wool-like Polartec®, Lycra®).
Younger adults have high regard for wool quality, softness and breathability - however 50 per cent see wool as difficult to care for and 42 per cent think wool apparel is itchy.
Both consumers and retailers perceive that wool is used for formal wear and classic knitwear for older people.
AWI invests in the development new wool blends, fabrics and textiles to address these consumer concerns.
Product pricing will continue to influence younger and older consumers, retailers and pipeline businesses with the option to use fibre alternatives. Wool is an expensive fibre to produce and to process compared to cotton or synthetics.
AWI is committed to research, development and innovation that will reduce costs and improve production efficiencies at each stage of the global wool pipeline.
Top of page
Marketplace prices for wool and other fibres
The price of wool can fluctuate dramatically in response to short-term shifts in supply or demand.
Upward movements in demand and prices are now more aligned with prosperity in key markets and/or with relative value of the Australian dollar. A low $A means buyers can afford to pay more in Australia for wool destined for export. This advantage declines as the $A strengthens relative to the US dollar.
On a price basis Merino wool is in luxury product class. Fibre competition, consumer demand, product and cost realities have reduced prices paid for wool. Sustained lower real prices have dampened the interest of farmers (in Australia and elsewhere) in supplying raw wool when land-use options exist, including grains, beef, prime lamb and timber.
Over the last four decades market and competitive pressures have forced all raw fibre prices down.
Demand for synthetics has grown significantly as price has fallen and performance improved. AWI is undertaking many projects to ensure wool remains competitive, such as non-wovens and novel wool uses.
Top of page
Selling and buying
To the Australian community and economy, wool continues to be a major industry. The business of producing and exporting Australian greasy wool and scoured wool and tops plus support industries employs an estimated 200,000 Australians. Export of wool earned around $3.7 billion in 2000-2001.
There are more 'mixed enterprises' producing sizeable quantities of wool than specialists (over 50 per cent farm income from wool). As many sheep are located in grain-sheep regions as in 'wool areas'. Wool supply shifts up or down as producers with land-use options decide whether to place priority on grain, beef, lamb or wool.
AWI recognises that producers harvest and need to sell a range of wool types. The majority of clips are Merino based, but 'crossbred' wool from lamb production is significant. In an Australian clip of 60 bales (2,500 sheep, 11,000 kg greasy wool at 180 kg per bale) there would be 50 bales of fleece lines, six of skirtings, and three of bellies. Selling systems need to ensure that all types are transferred from sellers to buyers.
Some 85 per cent of wool sold goes to the auction system. The Australian Wool Exchange (AWEX) conducts sales primarily in Sydney, Melbourne and Fremantle. There are some 80 brokers and agents in Australia. About 15 per cent of wool is sold 'privately' on-farm or to local wool handling facilities.
Two major wool brokers handling up to 50 per cent of wool, spurred by 40 to 50 smaller, independent handlers often in local centres.
Transport, handling, testing, warehousing, dumping and selling systems are commercial activities in competitive marketplaces.
The Australian wool marketplace is characterised by many sellers and fewer but a competitive number of buyers. Some businesses are vertically integrated along stages of the pipeline and processing chain.
In recent decades, the number of wool processors has fallen reflecting global fibre market and wool use trends. Cost and return pressures apply along the pipeline as wool strives to compete against lower cost synthetic and cotton products. The need to invest in modern equipment and economies of scale brings processors to critical decisions such as factory location and whether to use wool. Early stage processors (scouring, topmaking) now number in the hundreds worldwide.
The wool pipeline then fans out to about 1,500 spinners of yarn and 30,000 weavers and knitters. Hundreds of thousands of product manufacturers and distributors then work to sell to millions of selective, price conscious consumers.
Top of page
Related links