By Andrew Woods | Source: AWEX, ICS
Wool production varies between regions in terms of quality and quantity. For the 25 years following the collapse of the Reserve Price Scheme (RPS), sheep numbers shrank in the key production regions as crop areas increased. The other change taking place was the reversion of the flock demographics from historically high proportions of Merino at the peak of the RPS to levels more in line with pre-1980s levels. This article takes a quick look at this change.
In the 1990s it was assumed that around 15% of sales by-passed auction and analysis of sales pointed to private buying hot-spots such as South Australia, which skewed the type of wool bypassing auctions. By comparing wool tax receipts and auction data, in recent years auction volumes have accounted for about 93% of wool sales in Australia, therefore, auction data is a good guide production patterns in Australia.
Figure 1 shows the proportion of wool sales by region which accounts for 80% of the Australian clip sold at auction (clean basis) in the seasons 2017-18 and 1996-97. The eleven regions shown are ranked in order from largest to lowest, with one “non-region” making the cut-off. The “non-region” is V99 which is wool nominally from Victoria but without an identified wool statistical area – often this wool is rehandle wool.
The three leading regions are the Great Southern from Western Australia, south-west Victoria and central-west NSW, followed closely by northern and southern South Australia. The big three regions were also the big three in the late 1990s. South Australia has increased in importance in terms of wool production during the past two decades.
Figure 2 shows the proportion of Australian auction volumes originating from the other nine regions and five “non-regions”. Each state has a “non-region”. These regions account for the remaining 20% of the clip. Pastoral Western Australia and Queensland (north and south) have all shrunk markedly as suppliers of wool during the past two decades. Of the minor regions, only the Monaro has bucked the trend and increased its proportion of wool supply in Australia.
The proportion of Merino wool in the clip has dropped from around 92% to around 80%, give or take a couple of percent. It has stabilised around 80% since 2011-12. Figure 3 shows the proportion of Merino sales for the major production regions in 2017-18 and 1996-97. The Western Australian regions are still mainly Merino, as is northern South Australia and the western Riverina in NSW. Note how the proportion of Merino wool has dropped in south west Victoria, southern South Australia and the eastern Riverina. Similar large declines in Merino have also occurred in the minor regions of Eastern Victoria and Tasmania (Figure 4).
Wool production changes more dramatically than is generally realised, given an annual cycle of 12 months. In the space of 20 clips, the demographic structure of clips in Victoria, southern South Australia and the eastern Riverina has changed markedly. The message here for the supply chain, where fixed investments can have decades-long horizons, is to understand the ability and willingness of Australian farmers to respond to price signals on a whole farm basis.
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