The Australian wool market is starting the season with nervousness. Chinese textile mills have been scaling down buying orders and processing activities since April. Domestic shoppers in China, who consume half that country’s processed wool, are spending less, and European and North American demand has also slowed this year leaving mounting stocks of unsold product in wool’s pipeline.

At the very least, wool growers should expect a volatile year ahead. Woolen mills have adopted hand-to-mouth buying strategies to avoid being caught with too much raw stock or processed textile lines, while tightening supplies from Australia’s shrinking flock would exacerbate the trade’s price volatility and supply pinch points.

Today’s Australian wool clip is just one third its size in 1990 while the national sheep flock is the smallest since the mid 1920s. Wool’s longest running price surge since the 1980s has finally encountered consumer resistance and slower buying orders in May and June. Consumer resistance has coincided with economic uncertainty in Europe caused by Brexit and a slowing German economy, and processors had grown increasingly wary of the China-US trade war’s consequences. Facing a drought, the wool industry’s biggest problems in the years ahead would revolve around longer term wool supply. Average yield is at its lowest point in eight years because of the drought’s impact on fleece quality.