Wool grows at a fast clip

Wool prices are rising faster than Sydney house prices and farmers are rushing to cash in.  

Fred Whitby has watched booms and busts come and go - first as a little baby in his father's arms in the shearing shed 94 seasons ago - but he's never seen anything like this last week.

On Friday, wool reached an all-time high of 1681 cents per kilogram - up 58 cents in a week.

"They say it's even bigger than the 1951 boom," Mr Whitby said on his property in the hills behind Pambula on the NSW Far South Coast.

"I was shearing then, and we didn't get much - maybe £5 a hundred sheep. The growers kept most of it. But then life was pretty simple then and we didn't have much to spend it on up here."

That boom more than 60 years ago allowed the Whitbys to pay off the family farm.

Mr Whitby's grandfather selected the property, Sunnyside Villa, at Rocky Hall about 30 kilometres west of Pambula, in 1872 and the family has stayed put ever since.

The valley has become another planet compared to the world in which Mr Whitby grew up. Alternative lifestylers moved in big time and now comprise the majority of locals but he is hanging in and runs about 1200 fine wool merinos.

"I won't be leaving here soon. I got a very good price for my clip," he said.

Surging demand from Asia and Europe, particularly China and Italy, has turned the Australian wool industry into a "bull market", especially for fine Merino wool, and prices are continuing to push into the stratosphere.

Wool growers are making the most of the conditions and volumes for next week's auctions have jumped 12 per cent with almost 50,000 bales scheduled to be sold.

The indicator price in the second week of November last year was 1290 cents a kilogram, meaning the price has jumped nearly 400 cents in 12 months - an increase of 31 per cent. It had hovered around 1000 cents for the previous few Novembers. Sydney house prices grew by 10.5 per cent in the 12 months to September.

For 150 years wool built Australia. The golden moment came in the 1950s when a growing post World War II economy and the need for warm clothing to fight the Korean War saw wool fetch the vaunted "£1 a pound".

But Australia was ill-prepared to deal with the emergence of synthetic fibres and the re-emergence of cotton. The ensuing crash saw wool growers easily herded into backing a self-defeating reserve floor price scheme in 1974.

However good times returned briefly in the 1980s and greed ruled: small town bank managers conned growers into buying neighbouring properties, farm debt boomed, the national flock topped 180 million and the wool stock pile reached the heavens. Then Asia and Europe stopped buying and caused Australia's biggest business collapse. The government abandoned the floor price in 1991 and it tumbled overnight from 700 cents to 430 cents.  Wool faded to black for two decades.

This week the price signal, the Eastern Market Indicator (EMI), reached a record 1681 cents but the Australian Wool Innovation's Weekly Report on Friday warned that although wool growers were getting 30 per cent more for their clip than at the same time last year the number of buyers was less.

"As the price moved rapidly upwards, more buyers slammed the bag and discontinued their purchasing activity," the report said. "Conversely though, the top four buyers stayed true to their course and dominated the buying lists ... 70 per cent of the volume was bought by just the top four interests."