Farmer wool prices plummet as Aussies pay more for homegrown beef because of China trade tensions
Australian wool is looming as yet another victim of the coronavirus crisis because of our reliance on China, with Victorian farmers saying prices for their Mernio wool had halved.
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We’re the country that rode to prosperity on the sheep’s back but Australian wool is looming as a major casualty of the coronavirus crisis because of our reliance on China.
Victorian farmers told the Sunday Herald Sun prices for their Merino wool had plummeted by half.
Along with barley and beef exports, Aussie wool was shaping as a coronavirus victim, as overseas industries and retail markets shut and Australia’s relationship with China soured.
Australians also faced paying more for homegrown beef, experts warned last week.
Wedderburn wool grower Tony Holt said he was now shearing more than 2000 sheep, but would receive half the income as last year from his Merino fleeces.
“Chinese are heavy buyers of Merino wool and they pulled out of the market several weeks ago and it’s had a big effect … we’re probably down 40 to 50 per cent on last year’s prices,” he said.
Victorian Farmers’ Federation chief David Jochinke said the wool industry was “absolutely struggling” compared to other agricultural sectors, many of which were buoyant for the first time in a long time, thanks to rain.
It was now looking at ways to reduce its dependence on China processing plants and markets, and “reposition” Australian wool, he said.
“The wool industry as a whole is struggling with the fact that about 80 per cent was going to one country (China) to process the product, and when that country steps aside from the market it swings the supply and demand balance out of kilter, and pushes the prices down,” Mr Jochinke said.
“It shows the need for a very strategic look at how the industry positions itself moving forward.”
India could emerge as Australia’s White Knight, with the capacity to reliably process our wool, he said.
Australian wool products had also been the victim of the international retail shut down and – because they were often marketed and priced as luxury items – would be further hurt by the inevitable economic downturn.
“The industry is having these sort of discussions now and is reassessing its supply chain and looking for opportunities,” Mr Jochinke said.
“On the retail side, that everyday-type wear is the segment we need to get wool back into.”
New Australian Bureau of Statistics data shows Australia’s reliance on Chinese market demand and current trade tensions are also threatening the viability of beef cattle farmers.
Australian meat processors exported nearly 70 per cent of their product (by value) in 2018-19, with most of it beef, IBISWorld analyst, Tom Youl, said.
“The domestic price of beef is expected to increase by 7.3 per cent … as supply shortages outweigh the fall in demand caused by COVID-19,” he said.
China suspended export licences of four large Australian beef processing plants last month.