Production in Australia's wool industry has declined since the collapse of the reserve price scheme in the early 1990s, compounded by a long term shift from wool to synthetic and cotton substitutes in clothing. Many producers have switched from wool to more profitable lamb operations.Demand has jumped, with competition among buyers and reports of stockpiles being cleared. With the wool industry now heavily reliant on exports to China, an uptick in demand from Chinese wool mills on account of easing credit conditions and signs of higher global demand has seen prices increase significantly.

If the recent higher prices can be sustained, wool grower profitability should improve somewhat. Cotton prices have stabilised and even moderately increased this year after falling in mid 2014. However, decent supply and signs of sluggish Chinese demand have weighed on sentiment.

In 2014-15, Australian cotton production was estimated to have declined 43.5 per cent on markedly lower plantings due to reduced irrigation water availability. Last season’s yields were quite strong, however. Australian cotton lint production is expected to increase four per cent on the back of a 7.1 per cent increase in area planted. Prices are forecast to rise 9.3 per cent in 2015-16.