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Wool In 2024: What Drives This Commodity’s Market Value?

Guide to Understanding Wool Production and Price
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In this guide we explore the primary uses of wool and what makes wool valuable as an agricultural commodity.

We explain how different types of sheep are used to produce wool and what determines the quality of wool that’s produced, along with a step-by-step wool processing guide.

Read on to find out which countries produce the most wool and what drives market prices.

Interested in how wool is traded? See our full guide, or if you want to get started trading right now, here are options available in to consider:

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Between 74-89% of retail investor accounts lose money when trading CFDs.

What Is Wool Used For?

Here are the main uses of wool, split into four common categories:

Uses Of WoolDescription
blue socks
Most fine wool is woven or knitted into  a variety of clothing items:
Thicker wools can be used to produce a variety of furnishings:
Coarse wools can be woven into carpets.
Lanolin (wool grease)
soap bottle
Lanolin is a byproduct of wool production and an active ingredient in many skin, hair care and cosmetic products. Lanolin is known for its ability to moisturize and soothe skin and hair.

What Makes Wool Valuable?

Wool is a textile fiber obtained mainly from shearing the fleece of sheep. It is a fabric prized for its durability, comfort, and resiliency.

Wool plays an important role in producing items such as clothing, blankets, carpets, and upholstery.

Wool production dates back to prehistoric man. As far back as 10,000 BC, primitive tribes domesticated sheep both for the food they provided and for their pelts.

Since early man found the pelts both durable and comfortable, he soon began to develop the tools and methods for making wool. By 4,000 BC, the ancient Babylonians were wearing garments crafted from woven wool fibers.

How Big Is The Wool Industry?

Today modern production techniques have transformed wool manufacturing into an enormous global industry.

The world wool trade amounted to $4.72bn (USD) in 2018, with Australia leading as the top export nation of origin.

Although cotton ranks as the top overall fiber used by industry, wool reigns as the number one global source for animal fiber.

What Types of Sheep Produce Wool?

About 90% of the world’s sheep produce wool, and each sheep can approximately produce between two to 30 pounds annually.

A sheep’s breed, genetics, and nutrition are the main determinants of wool production, but the interval between shearing also impacts yield.

Lambs produce smaller quantities of wool than ewes or rams. Generally, a ram produces more wool than a ewe of the same breed.

How Many Sheep Breeds Are There?

There are approximately 1,000 different sheep breeds, including more than 50 varieties in the United States alone. Each of these breeds has different features such as hair color and length, body type, and breeding characteristics.

Sheep are raised for milk, meat, or wool depending on the breed and its physical characteristics.

Some breeds of sheep called hair sheep are covered in hair instead of wool. These sheep represent 10% of the global population and are raised mostly for meat.

Hair sheep shed some fibers, but they are of no use in wool production.

They can’t be dyed like other wools, and their presence can contaminate usable fibers from wool sheep. For this reason, farmers avoid raising hair sheep with wool sheep.

Types Of Wool & Useful Terminologies

There are several wool categories to know about, although these three are some of the most common types of wool used:

CategoryFiber DescriptionGlobal ProductionBreedsFarming Facts
Fine Wool SheepSmall fibers - diameters of less than 20 microns. About 37% of global output is fine wool. Fine wool is versatile and produces garments less likely to itch.Merino, Rambouillet (found in Western United States)Best adapted to dry and semi-dry regions. Known for their longevity and instincts to flock.
Long Wool  and Carpet Wool SheepLarge fibers - diameters generally greater than 30 microns. Carpet wool sheep produce the coarsest grade of wool, usually over 38 microns. As their name implies, these sheep produce wool for carpets.Coarse wools represent about 41% of global production .Border Leicester, Coopworth, Cotswold, Leicester Longwool, Lincoln and Romney. Carpet wool sheep varieties include Icelandic, Karakul, Navajo Churro and Scottish Blackface. Adapt best to cool areas with high precipitation levels and ample crops for foraging. Carpet wool sheep are well adapted to extreme environments.
Medium Wool Meat SheepCan produce medium or long fibers. Farmers mostly raise these sheep for meat.Produce the lightest and least valuable fleeces. Some medium wool can be made into blankets, sweaters and socks. This category represents 22% of global production.Dorset, Hampshire, Shropshire, Southdown and SuffolkAdapt to a variety of climates.

The wool from one sheep is known as fleece, while the wool from a group of sheep is known as a clip.

Here are some more useful terms and meanings:

SheepAnimal over one year of age that has usually produced offspring
LambAnimal less than one year of age with no offspring
EweA female sheep. A young female is called a ewe lamb.
RamA male sheep that is sometimes referred to as a buck. A young male is known as a ram lamb.
WethersA castrated male sheep. Wethers are less aggressive than rams.
YearlingAn animal between one and two years. Yearlings may or may not have produced offspring.
FlockA group of sheep
ShepherdA caretaker of sheep
SheepherderThe individual responsible for keeping the sheep together in a flock.

How Do You Process Wool?

There are seven steps in the production of wool:

  1. Shearing: Farmers usually shear sheep once a year in the spring, although in some countries this occurs more frequently. Most shearing takes place by hand, although new technologies allow computers and robots to complete the task.
  2. Grading and Sorting: Sorters break up the fleece according to the quality of the product. The best quality wool derives from the head and sides of the animal and is used to make clothing. Lesser quality wool comes from the legs and is usually used for making rugs.
  3. Cleaning and Scouring: Wool taken directly from sheep is called grease wool. It contains contaminants such as sweat and dirt that comprise 30 to 70% of the total fleece weight. Alkaline baths clean the fleece and remove byproducts called lanolin. These byproducts are used in the production of many household products.
  4. Carding: During this process, the fibers are passed through metal machines and straightened into slivers.
  5. Spinning: Spinning machines form yarn by spinning the fibers together.
  6. Weaving: Two types of machines – plain weaves and twills – weave the yarns into fabrics. Plain weaves produce looser fabrics, while twills can produce tightly woven smooth fabrics with elaborate patterns.
  7. Finishing: Several finishing processes ensure that the fibers interlock and do not shrink. During this stage, some garments are dyed as well. According to the Food & Agricultural Organization (FAO) of the United Nations, the global inventory of sheep exceeds 1.1 billion.
sheep shearing
Sheep Shearing via Photographic Collection from Australia, CC BY 2.0, via Wikimedia Commons

Top Wool Producing Countries

Here are the ten biggest producers of wool, with Australia, the USA, and China leading the global production market.

RankFlagRegionProduction Output (tonnes)
#1Flag of AustraliaAustralia478,492
#2Flag of ChinaChina235,927
#3Flag of USAUnited States of America150,873
#4Flag of New ZealandNew Zealand102,457
#5Flag of ArgentinaArgentina88,897
#6Flag of TurkeyTurkey74,294
#7Flag of IranIran56,990
#8Flag of United KingdomUnited Kingdom49,623
#9Flag of IndiaIndia31,783
#10Flag of SudanSudan20,739

What Drives the Price of Wool?

Alongside many others, there are four key factors that impact wool prices.

  1. Wool Stocks
  2. Consumer Preferences
  3. Workplace Trends
  4. Australian Dollar

Wool Stock: How Much Wool Is Available?

The supply of yarn and wool tops, the semi-processed product used to make yarn, in warehouses can impact the price of wool.

As these stocks build to higher levels, spinners have diminished demand for wool tops. This, in turn, can cause the price of greasy wool to fall.

On the other hand, if demand for finished clothing products accelerates, then wool top and yarn inventories can get depleted. This can lead to a supply shortage of greasy wool and higher prices.

Consumer Preferences: Types Of Wool In Demand

Consumers increasingly demand thinner apparel fabrics, although this trend can certainly change in the future.

To keep pace with these trends, the wool industry is increasingly spinning finer wool and producing more breathable, lightweight garments. However, other natural fabrics (e.g., cotton and silk) and synthetic fabrics (e.g., polyester and acrylic) compete in this lightweight segment of the market.

A variety of yarn for textile production
A variety of yarn for textile production – Photo by Maranda Vandergriff on Unsplash

Traders should keep careful tabs on these trends. Wool manufacturers are revising their production practices to develop sportswear and next-to-skin lightweight garments.

Their failure or success in these endeavors could impact wool prices.

Workplace Trends For Wool Clothing

In addition to consumer preferences for lighter garments, workplace trends also impact wool prices.

In recent years, there has been a trend toward casualization of offices in many Western countries. These trends are detrimental to wool demand since the vast majority of business suits are made from worsted wool.

However, in many emerging market countries, increased economic activity is producing more demand for suits and other wool products.

Traders should pay attention to overall white-collar employment and workplace trends for clues about wool prices.

Australian Dollar Vs. Wool Prices

The main futures markets for both greasy wool and fine wool futures are in Australia.

Unlike most commodities, which are priced in US dollars, wool futures are priced in Australian dollars.

When the value of the Australian dollar drops against other currencies, it takes more Australian dollars to purchase wool than it does when the price is high.

Therefore, the price of wool rises. Put another way, sellers of wool get fewer Australian dollars for their product when the currency is strong and more Australian dollars when the currency is weak.

Expert Opinions on Wool

Analysts are impressed with the recent strength in wool prices, but many wonder whether it is sustainable.

One expert attributes strong Chinese demand and a weak Australian dollar for the price-performance:

Phil Zieball Agribusiness Economist

“The somewhat lower Australian dollar, to which the wool industry is usually very sensitive, has probably helped in the last month. Still, it is unclear whether prices are sustainable at their current levels. While we see good signs in the form of very strong Chinese demand, this is not guaranteed to continue.”

Phin Zieball, Agribusiness Economist at the National Australian Bank,

However, another industry expert sees new pockets of demand that point to longer-term price strength for the commodity.

“One key point is consumer appetite has moved distinctly in favor of natural fibers, with health, sustainability, and ethical practices leading the way. Consumers know what they want and wool is certainly much higher on the shopping list today than it has been for many years.”

Matthew Hand, Processors President at the Australian Council of Wool Exporters

Where Can You Trade Wool?

If you are looking to start trading wool and other agricultural commodities, you can start your research with this list of regulated brokers available in to consider.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

Further Reading

Want to learn more about wool and where you can trade it? See our guide to Wool Trading Instruments and Brokers.

For other agricultural commodity insight, see these guides on:

  • How barley is produced
  • What drives oat prices
  • The role of wheat in the global economy

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