Record wool prices deliver Australia's golden fleece

SYDNEY (Reuters) - Australian sheep farmers are confident restricted supply will underpin high wool prices for years to come as the fiber continued its stellar run in the last sales before winter recess.

“It’s wonderful times,” said Robert McBride, a wool grower from New South Wales whose family company, AJ & PA McBride, is one of the largest wool producers in the world.

The benchmark Eastern Market Indicator dipped back slightly from record highs of more than A$20 kg to close at A$19.81 kg on Friday, a 31 percent or A$4.74 increase on last year’s July close of A$15.07, according to the Australian Wool Innovation weekly price report.

The prices have been on a tear-away run hitting new records since March.

McBride said flock sizes had reduced dramatically over the past 15 years and an extended drought in the eastern states of New South Wales and Queensland would further constrict supply.

“While demand is increasing, we expect the supply squeeze for wool to continue for foreseeable years to come,” he told Reuters by telephone on Sunday.

Sixth-generation sheep farmer Robert Ingram said the higher prices allowed farmers to invest in much-needed infrastructure such as fences, water supply equipment, machinery and IT communications.

“That improves your efficiency - you get more return per hectare,” he said.

Australia’s chief commodities forecaster, The Australian Bureau of Agriculture, Resource Economics and Rural Sciences (ABARES), expects strong demand for superfine wool and slow supply growth to continue.

“In 2018–19 the value of total Australian wool exports is forecast to rise by 9 percent to A$4.7 billion, supported by higher wool prices and increased export volumes,” the bureau said in its June quarter agricultural commodities report.

Australia is expected to produce 343,000 tonnes of shorn wool (greasy) in 2017–18, increasing 2 percent to 350,000 tonnes in 2018–19, ABARES forecast.

China, the world’s largest producer and exporter of woolen textiles and clothing, is the largest importer of Australian wool. In the five years to 2016–17, China accounted for 77 percent of Australian wool exports, the report said.

Australian wool markets break from Monday July 16 until the first week of August.

Reporting by Alison Bevege; Editing by Robert Birsel