Wool prices will go up as global incomes rise, ABARES tips

According to the Australian Bureau of Agricultural and Resource Economics and Sciences' newly released Agricultural Commodities report, the nominal wool price will rise by 6 per cent to 1243c/kg.

ABARES believes lower inflation and interest rates will support disposable incomes and lead to an increase discretionary spending, therefore helping boost sales of woollen garments.

In 2024-25, the nominal value of wool production is forecast to reach $3 billion, a 5pc increase from the current financial year's forecast $2.9 billion.

Wool production values are expected to keep increasing over the next three years, ticking upwards to $3.1 billion by 2028-29.

Wool export values are expected to go up by 5pc to $3.2 billion in the coming financial year.

The report suggests that wool export values for the current financial year are down 12pc to $3 billion, after wool export prices fell due to reduced demand from clothing retailers still working through stock backlogs from the COVID-19 pandemic downturn.

ABARES puts Australia wool production volumes up by 2pc to 416,000 tonnes this financial year, due to a higher number of sheep shorn and an increase in sheep and lamb turn-off.

Going into the coming financial year, wool production volumes are forecast to fall slightly to 411,000 tonnes, reflecting a small decline in the sheep flock, and then anticipated to remain relatively stable over the next three years.

Australian wool export volumes are forecast to fall by 1pc to 418,000 tonnes in the current financial year, as subdued global demand drives wool stockpiles, with a further 1pc drop to 415,000 tonnes in 2024-25.

On a global level, wool demand is expected to strengthen in the coming financial year after a weaker period, despite the economic outlook for China, Australia's biggest customer, remaining subdued.

ABARES forecasts that advanced economy demand for woollen products will go up as macroeconomic conditions improve worldwide.

China's demand for wool products is expected to remain relatively subdued compared to pre-pandemic levels however strong income growth in China and other key markets in coming years is expected to give demand for woollen products a further boost.