A total of 40,292 bales were offered recently of which the trade bought 91.8 per cent. The trade purchased 94.6 per cent of the Sydney offering (11,520 bales) 92.2 per cent of the Melbourne offering (19,928 bales), and 87.5 per cent of the Fremantle offering (8844 bales).

Elders outlook

As this season comes to a close, seasonal conditions remain in the balance for the new fiscal year. In currency-adjusted terms merino wool prices continue to trade at high levels (as do man-made fibre prices) reflecting the limited supply of medium and broad merino wool compared to the recent past.

The industry has been shrinking in total supply since 1989/90 with processors forever on the “back foot” trying to adjust capacity to new, lower levels of supply.

A super strong exchange rate masks the strength of the merino wool market. World crop prices are high enough to translate to high local prices despite the high exchange rate.

In the next few years the supply of greasy wool in Australia will fall as more land is devoted to crops.

No amount of marketing dollars will change this. What will help in the long run is further development of on-farm productivity so that wool growing can compete with crops and meat in terms of farm gate margin.

Downstream market participants tend to think of the margin being driven by price but in the long run the comparative margin is driven by which enterprise can lower their cost base the best.