The rise of composite breeds has stripped the value out of lamb skins and a significant recovery looks unlikely, according to one exporter.
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Southern Lambskin Exports managing director and vice-president of the Australian Hide, Skin and Leather Exporters Association Luke Kivlighon said while the sheepskin market was fairly steady at present, lamb skins were a different story, paying up to $3, while others incurred negatives of up to $3.
"There are so many of these composite breeds on the market... the farmer is now concentrating on breeding the animal for the butcher," he said.
"In the old days we used to get a really nice lamb skin that we could sell to the fashion world and they could make garments... now a lot of these skins, if you saw the wool that was coming in on them, it just really doesn't have a value so it makes it difficult."
Mr Kivlighon said conditions were "disastrous" last year, with pretty much all lamb skins holding negative value and numerous processors charging disposal fees.
"We've improved a bit and there are lambs that are in the positives," he said.
"Good lambs with a good wool style are still making money, but there are so many that are of no value.
"Dorpers were worth some money because some of those do go into the high end fashion job but the lower grades that were going into Pakistan and places, that's completely gone.
"Where we were paying money for those last year, those are in the negatives now.
"We're lucky that there are these few big players that are taking large volumes because if they weren't there, it would be a disaster for our industry."
Mr Kivlighon said skins values had been declining for years and the industry was currently at a stage where everything was difficult.
"Dorpers and these composite breeds weren't even about when I started in this job... we had market trends and a fashion side that our skins were going to Turkey and Russia and they were making double faced jackets and mouton jackets," he said.
"We had ample skins that were a really good wool style but now we've only got a smaller percentage of those."
Meat & Livestock Australia's latest national skins report places the crossbred sheep skin indicator at 75c, the Merino sheep skin indicator at 1241c and the lamb skin indicator at 179c.
Last financial year Australian sheep skin exports fell by almost $76 million due to reduced demand, with the average price per skin falling 46.1 per cent.
Mr Kivlighon said if skins weren't to be dumped, exporters needed to find alternative pathways for lower grade skins, but fees for freight and processing posed challenges
"Our next issue will be how many skins can you dump?" he said.
"Last year we took a fair percentage of skins in at a negative and I was lucky enough to have a Chinese company that took them... we're hoping to do that again.
"We can't just fill our sheds with product that's not going to move.
"Hopefully if you're putting negative $3 on them, you can cover your costs and get someone to take them... you've got to get a Chinese tanner that will take the risk and take them and see if they can make something out of them."
Episode 3 market analyst Matt Dalgleish said while there had been marginal improvement in skins costs since last year, the fashion industry was very subject to macroeconomic conditions.
"I can't see a big uplift until we start to turn the corner on some of these cost of living pressures and growth rates in some of the key economies," he said.
"Even the pricing for alternative items that can be used as part of the manufacture of these things, that is synthetic fibres versus the pricing of wool and sheepskin, they are remaining quite price competitive because they can get their production more and more efficient each time around because it's a manufactured process.
"The process to slaughter your animal and remove skins is labour intensive and it's one of those things where there's not a lot of technological advancements... there are not as many efficiency gains that can be made in the production side."