Where to for Wool and

Sheepmeat?

Chris Wilcox

Chairman, Market Intelligence Committee

International Wool Textile Organisation

ASI Board of Directors

30th January 2016

Topics

World wool and

sheepmeat

production

Wool and lamb

prices

Demand trends and

drivers

Prospects in 2016

Long term prospects

and strategic drivers

World Wool Production Low, Sheepmeat

Production Rises

• World wool production at lowest level in 70 years

• Shift in interest in key wool producing countries to meat-sheep

and dual-purpose sheep

• World production of sheep meat has increased steadily in the

past decade– Stabilizes in 2014-2016

• World sheepmeat production now at the highest level in over

50 years

0

200

400

600

800

1000

1200

1400

1600

1800

mkg clean

Production Opening stocks

World Wool Production and Stocks

Source: Poimena Analysis and International Wool Textile Organisation

Note: The year refers to the season ending eg 2000 = 1999/2000

Data in 2015 is an estimate and in 2016 is a forecast

Updated January 2016

5000

5500

6000

6500

7000

7500

8000

8500

9000

tonnes

World Sheepmeat Production

Source: FAO of the United Nations, Poimena Analysis

Downloaded January 2016

Australia36.1%

New Zealand34.7%

UK9.0%

Ireland3.7%

Spain2.9%

USA0.3%

Other13.2%

Source: FAO of the United Nations

Downloaded January 2016

World Trade in Sheepmeat - 2013

1,144,600 tonnes

400

600

800

1,000

1,200

1,400

1,600

2008 2009 2010 2011 2012 2013 2014 2015 2016

US cents/kg

Source: AWEX – 2014/15 basis

Data to 22nd January 2016

Australian Wool PricesEastern Market Indicator

1061

1494

458

trend

Global

Financial

Crisis

906

World economic

recovery, cotton

prices surge

Euro debt

crisis

835

895

Source: MLA, NLRS, Beef & Lamb NZ, USDA

Notes: Trade lamb for Australia, all lamb export price for NZ and 55-65 lb, choice and prime lamb for US

Data to December 2015

US$ Lamb Prices Drop Back

0

100

200

300

400

500

600

700

800

900

Australia NZ USA

USc/kg

Current Demand Drivers

General– Improving economic growth in key advanced

countries

– China in transition

– US$ rises against main producing countries

Wool– Fashion trend towards woollen woven double-

faced fabric for women’s overcoats

– Increased demand for raw wool by China

– BUT – slowdown in China wool clothing

product exports and US imports of wool

clothing

Lamb and Sheepmeat– Rising consumer incomes bring higher

demand in China

– Increased demand from Middle East

Source: OTEXA, data to November 2015

US Imports of Apparel - Value12 month moving average - year-on-year change

-20%

-10%

0%

10%

20%

30%

Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

Wool Cotton Synthetics

% change y-o-y

Wool Imports by China Up – Lower for Other Major

Processing Countries(Calendar Year to November)

0

100

200

300

400

500

600

700

China India Europe Other Total

mkg greasy equiv.

2010 2011 20122013 2014 2015

-2%

+8%

-13%

+3%

Note: From the five major exporting countries (Australia, New Zealand, Argentina, Uruguay and

South Africa

Source: Australian Bureau of Statistics, FLA, SUL, Capewools, NZ Meat and Wool

-6%

0

50,000

100,000

150,000

200,000

250,000Australia

2010 2012 2014 2015

Tonnes

Growing Demand for Lamb from the Middle East

and China

Source: DAFF, Beef + Lamb NZ, MLA

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000New Zealand

2010 2012 2014 2015

Tonnes

Key Drivers of Demand and Prospects for 2016

• Uneven economic growth in 2016

– Solid in US and UK, improving in Europe and Japan

– China slowing and in transition – the key for wool

• Consumer confidence more positive

• BUT… Disappointing results for US’ imports of wool

products

• High price ratio for wool against cotton prices and synthetic

fibres

• Higher US$ against the A$ and NZ$

• Higher demand for lamb and sheepmeat from the Middle

East and US

Positive conditions but risks remain

What about the longer term?

• Long-term prospects for wool depend on

global economic conditions and income

growth, not relative production with other

fibres

• Rising consumer incomes in China and other

emerging countries will drive demand for food

and particularly protein

• On demand side, focus should be on

consumer requirements‒ Business-wear for men will be a mainstay for

wool along with women’s overcoats

‒ Knitwear a growth area, particularly with

increased demand for active leisurewear and

casual garments

‒ Innovative cuts of lamb meat will attract

consumers

Apparel Wool Consumption Rises as Incomes Lift

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000

Income (US$/head)

Italy

UK

Turkey

Japan

USA

Germany

S Korea

India China

Spain

Australia

Russia

France

Wool consum

ption (

cle

an k

g/p

er

head)

Source: International Monetary Fund and Woolmark

Apparel wool consumption is apparel NDA at retail average 2011-2013 as estimated by Poimena

Analysis. Income is US$ GDP per head in 2013 on a purchasing power parity basis.

Trend Line

Product Segment Prospects

Growth Mainstay Decline

100

200

300

400

500

Index n

um

ber:

1961=

100

1960 1970 1980 1990 2000 2010

Roots and tubers Cereals

Meat Milk

Eggs

Protein Consumption Growing Rapidly

Source: FAO – Presentation by Battista at the IWTO 2013 Congress

Increased Demand for Sheep Meat

0

20

40

60

80

100

120

140

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

bovine ovine pigmeat poultry

Types -- Developing countries

2005-07 (million tons) (right scale)

2050 (million tons) (right scale)

growth p.a. 1970-2007 (left scale)

growth p.a. 2005/07-2050 (left scale)

0

50

100

150

200

250

300

350

400

450

500

0

1

2

3

4

5

6

7

All meats

2005-07 (million tons) (right scale)

2050 (million tons) (right scale)

growth p.a. 1970-2007 (left scale)

growth p.a. 2005/07-2050 (left scale)

Source: FAO – Presentation by Battista at the IWTO 2013 Congress

Thank You!