1. Outlook for Wool Jammie Penm Chief Commodity Analyst ABARE

2. Outline World demand and supply trends Australian sheep flock and wool production Implications and price projections

3. World demand and supply trends World wool consumption has declined But sheep numbers and wool production also declined More sheep meat production led to lower supplies of fine wool

4. World fibre consumption Mt Source: International Wool Textile Organisation wool all fibres Mt clean equivalent Wool (right axis) All fibres (left axis)

5. Sheep numbers, by country million head Source: International Wool Textile Organisation

6. Wool production, by country kt clean equivalent production on a seasonal basis (e.g. 2008 = 2007-08) Source: International Wool Textile Organisation

7. World wool production, by IWTO grade kt clean equivalent production on a seasonal basis (e.g. 2008 = 2007-08) Source: International Wool Textile Organisation ≤ 24.5µm 24.6 – 32.5µm > 32.5µm

8. Australian sheep industry Australian lamb slaughters are up Wool producers focus more on fine wool production Developments in China important to Australian wool industry

9. Wool production & lamb slaughterings Australia greasy wool production lamb slaughterings Source: ABARE index 1990-91=100

10. Micron profile of Australian wool clip 19.6-22.5µm 24.6+µm kt greasy weight 22.6-24.5µm 0.0-19.5µm Source: Australian Wool Testing Authority 2008-09

11. Australian wool export destinations Source: ABARE 2008/09 439 kt greasy equivalent* *includes greasy, semi-processed and wool on skins

12. A few observations China’s wool demand is projected to rise as growth in demand for textiles & clothing continues Competition from other low cost countries will increase over time China needs to produce high-quality woollen textiles & clothing to compete To achieve that China will have to import more fine wool

13. Chinese exports of woollen textiles and clothing kt Source: International Wool Textile Organisation

14. Chinese wool production semi-fine 25.1- 40 μm kt fine ≤25 μm Source: China Statistical Yearbook 2008 coarse 40.1 μm

15. Implications for the future Australia will be a major world supplier of fine wool Australian sheep flock will rebuild only gradually Fine wool prices to be supported by limited supply

16. Summary of ABARE’s wool outlook for 2010-11 EMI to average 920 c/kg clean Export volume to fall 4% to 385 kt greasy equivalent Export value: $2.06 billion Sheep flock to increase gradually from 2011-12