A good Trans-Tasman wool industry tussle between Australia and NZ has revealed our Kiwi neighbours may be leading the way in market diversification.
When it comes to production Australia are on top, generating three times as much wool as NZ does per year, sending about 345 million kilos of wool offshore.
But our crossbred heavy neighbours across the ditch could be nudging ahead in the area of market diversification with data showing they have been trending away from China since 2015.
Australia grows predominately fine Merino wool whilst NZ are hardcore strong wool producers with little fine production.
NZ currently has around 25.8 million sheep, which sounds like a lot, but compared to Australia or China, numbers are relatively small.
And according to Rabobank's agriculture analyst Genevieve Steven of Christchurch, sheep numbers in NZ since 1990 have halved.
"Numbers have declined generally due to land use change, particularly through the early 2000s where NZ experienced a dairy boom and a lot of sheep farms were converted into more lucrative dairy farms," Ms Steven said.
"In more recent times there has been an number of droughts across many of the regions that have forced farmers to reduce ewe numbers and result in a total reduction of sheep numbers.
"Essentially our wool production has also decreased in line with reducing sheep numbers between 1990 and 2020."
In 2020-21 NZ produced around 133 million kilos of wool and exported about 80pc with most of that in clean form, meaning it has already been through the scouring process.
Last year 68pc of their wool was exported scoured and 32pc greasy.
China is NZ's main export market with 32pc of their exports heading there last year.
Their second key market is India followed by Italy in third.
"In terms of China's own total production, NZ accounts for around 16pc of their imports," Ms Steven said.
"China has a large sleep flock of its own with around 173 million sheep, so it has significant production plus it imports 121 million kilos of wool a year itself.
"NZ is still a relatively important part of it, but understandably not as important as Australia."
Of NZ's 80pc exports, a majority of that goes into carpet and textile production with the 20pc balance used domestically.
Interestingly, in 2021 NZ exported around five tonnes of wool carpet - mostly to the US and also to Australia.
Just like NZ, China is by far the biggest export market for Australian wool.
But in comparison to NZ, in any given month in Australia 75 to 90pc of wool production goes to China.
A little goes offshore to India, Italy and the Czech Republic.
Ms Steven said looking at the data over the last 10 years, when compared to Australia, NZ has become more diversified in terms of its markets.
"China peaked as NZ's main export market in 2015 when we sent 57pc of our wool exports to China and since then wool exports to China have been declining," Ms Steven said.
"There are a couple of factors at play here - one is NZ's total wool production and exports have been declining, but secondly we have been sending less product to China and more product has been going to India and other smaller markets such as Nepal and the Czech Republic."
Rabobank's agricultural analyst Dennis Voznesenski said NZ has been trending away from China since 2015 in terms of NZ's diversification of exports.
He said a good tool in analysing the trend is spinning machine exports.
"Looking at the two main markets for spinning machinery exports, Japan and Germany, they have been sending more and more to places like India and Pakistan," Mr Voznesenski said.
"The proportion actually going to China has declined from 39pc in 2019 to 35pc in 2020 and last year in 2021 it was 32pc.
"It will be really interesting to watch that if in the future, the Chinese processing industry for the apparel sector starts shifting to other markets and whether more of Australia's wool ends up going to other non-China markets.
"And like NZ Australia start diversifying their export markets so to become a little less dependent on one single destination."
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