The Wool Industry

The Heart of the wool industry is here on the Riverina Plains

Australia is the largest wool-producing country in the world, supplying over 50 per cent of the world’s Merino wool. Australia is also recognised as producing the world's highest quality woollen fibre - Australian merino wool - and the core of that industry is right here on the Riverina Plains.

First sheep arrived with the First Fleet

The story of wool in Australia began not long after White Settlement. About 70 sheep, suitable only for mutton, survived the journey to Australia with the First Fleet, which arrived in late January 1788. A few months later, the flock had dwindled to just 28 ewes and one lamb. Over the next few years sheep were imported from the Cape of Good Hope, India, England and Ireland, mostly for meat.
The wool industry in Australia began with John and Elizabeth Macarthur. They arrived in Port Jackson in 1790. Six years later, John Macarthur bought his first merino sheep from a flock of Spanish merino sheep reared in South Africa. At the time, sheep were used for both their meat and their wool and the quality of the fleece from the breeds was very poor. Other farmers in the region also bought merino sheep in 1796, but they cross-bred their merinos with other breeds, which resulted in coarse wool of a low quality.
The merino sheep was originally bred in Spain, a country with a warm climate like Australia. Unlike many of the other European animals imported to Australia at the time, the breed was able to cope with the summer heat. Merinos are known to have a thick, fine fleece that is suitable for spinning and weaving. The Macarthurs did not cross-breed their merinos. By 1803, their flock numbered over 4,000 almost-pure merinos. In subsequent years they bought merinos from flocks in various locations which meant that the bloodline of the flock – and therefore the health of their sheep and the quality of their wool – was strengthened and improved. In 1807, the Macarthurs sent their first bale of wool to England.
By 1820 there were around 120,000 sheep in Australia, mostly meat sheep. During the 1820’s around 5,000 Merino wool sheep were imported from Saxony, France and England and the early foundation of the Australian wool industry was laid. 

Over the next 30 years the pastoral industry expanded into newly opened lands in and around Sydney and beyond the Blue Mountains in New South Wales, as well as districts further afield such as Port Phillip and Portland Bay in present day Victoria. Imports of sheep continued to grow as the demand for sheep meat and wool increased in Australia and Great Britain. By 1830 there were nearly 2 million sheep and in 1836, wool production in Australia outstripped that of Germany. Over the next decade, imports of sheep into the Colony of New South Wales reached 20,000, and in 1848 exports of sheep had reached almost 90,000. In the same year, 5,657 tonnes of wool, valued at £683,623, were exported to Great Britain from New South Wales, Queensland and Victoria.

On the Riverina Plains

The first recorded evidence of drought conditions by European observers in the local district are those of Henry Lewes of Moira who noted evidence of prolonged drought which he believed had begun around 1837. In a cycle which has been repeated again and again, the drought was broken by a flood in 1843, the first recorded flood on the Murray-Edward river system.

Benjamin Boyd took up land on the Riverina plains in 1842. He established a vast pastoral run, called ‘Deniliquin’ which extended from Tuppal Station near Tocumwal in the east, almost to Swan Hill and from the Edward River to north of Conargo.

By 1850, Australia was supplying half of the British wool market and had around 16 million sheep. Sheep numbers grew a further 25% during the 1850s, reaching 20.1 million in 1860. Sheep numbers increased rapidly, from 20.1 million in 1860 to over 106 million in 1892. Over the same period wool production increased nearly tenfold, from 26,753 tonnes to 289,380 tonnes, as fleece weights improved with the development of new strains of sheep.

In 1855, the Tyson Brothers bought significant land holdings in the liquidation sale of Boyd’s Royal Bank holdings. Land purchased included ‘Deniliquin Station’, which comprised Upper Deniliquin (Mundiwa) of 105,964 acres and Lower Deniliquin (Wandook and Dahwilly) of 92,560 acres. They also acquired ‘Carnago Run’ (sic) which was around 30,000 acres and smaller freehold areas closer to Deniliquin of around 6,000 acres.

In 1858, William McKenzie purchased ‘Conargo Run’ (later known as ‘Quaimong’) and opened the original Conargo Inn. The Drop Log Stables which were built behind the Inn are still standing. They were restored by Manny Pottinger and used as his repair workshop.  

The Peppin family purchased ‘Wanganella’ from William Adams Brodribb in March 1858. The back blocks were however without reliable water over the summer and by 1859, the family faced financial ruin. The lack of water was the greatest challenge of the saltbush plains on the Riverina. It was the reason pastoral leases radiated outwards from crucial creek frontages. Sheep simply didn’t survive on the arid plains.

In 1861, the Peppins bought two German Negretti rams and later some Rambouillett rams, including the famous ram called, Napoleon. They were the beginning of the famous Peppin Merino, which not only survived in the harsh Australian environment, but thrived and produced a fleece of exceptional quality.  

The village of Conargo had been gazetted in 1860 and continued to grow during the Victorian Gold Rush. It sat on the banks of the Billabong Creek, at the crossroads of the stock routes travelling north to Queensland and south to Bendigo and Melbourne. In 1864 the Post Office and Riverine Hotel were opened. By 1867, David Rogers had opened a fourth Hotel, The Billabong on the site of the famous Conargo Pub.

In 1870, the drought was broken by a major flood, described as ‘the daddy of them all’ when the river rose to 31 feet and 9 inches. The peak height at Deniliquin as not been topped since.

In 1891, the Shearers’ Strike began in Queensland and spread south during the season. It was one of Australia's earliest and most important industrial disputes. The dispute was primarily between unionised and non-unionised wool workers. The strike was however, poorly timed and when the union workers ran out of food, they were forced to come to terms. The outcome is credited as being one of the factors in the formation of the Australian Labor Party. 

Economic and climatic problems, culminating in the Depression of the 1890s and the Federation Drought of 1895-1906, seriously affected wool production. National sheep numbers fell from 106 million in 1892 to 54 million in 1903, a drop of almost 50%. Droughts continued to affect the pastoral industry in the early part of the 20th century and caused significant periodic drops in sheep numbers.

Wool producers were given some respite during the First World War when all Australian wool was purchased by the British Government at 55% above pre-war values. Compounding the tragedy of the War, however was the 1914 – 15 Drought which was so severe that the entire wheat crop failed and the Murray River stopped flowing. It took about two decades for sheep numbers to be restored to the levels of 1892. In 1926 sheep numbers rose above 100 million once again. Wool exports accounted for three quarters of all pastoral export in Australia and the UK purchased half of all Australian wool exports.

By the late 1920’s Australia was producing half the world’s Merino wool and had 17% of the world’s sheep, but tragedy loomed on the horizon. When the Great Depression hit in 1929, Australia’s dependence on agricultural and industrial exports made it particularly vulnerable and the country was profoundly affected.

During the late 1930’s prices rose again and by 1937, wool provided 30% of the total value of Australian merchandise trade exports, earning £46.9 million.  

The first wool stockpile

With the outbreak of World War II, demand for wool by Britain increased substantially. The Australian and British governments entered into a number of contracts to purchase Australian produce including wool, mutton and lamb at agreed prices. In 1939 the governments of the United Kingdom and Australia arranged for Britain 'to acquire the Australian wool clip for the duration of the War and one full wool season after the cessation of hostilities', surplus to requirements of Australian manufacturers. (Year Book of Australia 1940, p. 962). Similar agreements were reached with South Africa and New Zealand. 

 
During the War however, agricultural production dropped significantly; partly due to the war effort itself and partly as a rest of prolonged and devastating drought. Farmers were caught in a double bind as all trains were taken up with the war effort they were unable to get stock out, or bring feed in. Millions of sheep died or were sold for slaughter. Sheep numbers fell to 96 million.  By the end of the War, exports of wool had fallen to 262,000 tonnes, a drop of 32% in seven years. Ironically, supply still outstripped demand and the stockpile in the United Kingdom stockpile reached 10.4 million bales of Australian, New Zealand and South African wool. In 1945, the four governments formed a joint organisation called The U.K. Dominion Wool Disposals Limited. It was set up to market and sell the stockpile, together with future clips, in an orderly fashion to ensure the stability of wool prices.

With the outbreak of the Korean War in 1950, American demand for wool soared and by the end of 1951 all of the stockpile had been sold, as well as the wool bought in by the organisation at the floor price. On 22 January 1952, the joint organisation was voluntarily liquidated.  

The Golden years 

With the outbreak of World War II, demand for wool by Britain increased substantially. The Australian and British governments entered into a number of contracts to purchase Australian produce including wool, mutton and lamb at agreed prices. In 1939 the governments of the United Kingdom and Australia arranged for Britain 'to acquire the Australian wool clip for the duration of the War and one full wool season after the cessation of hostilities', surplus to requirements of Australian manufacturers. (Year Book of Australia 1940, p. 962). Similar agreements were reached with South Africa and New Zealand. 

During the War however, agricultural production dropped significantly; partly due to the war effort itself and partly as a rest of prolonged and devastating drought. Farmers were caught in a double bind as all trains were taken up with the war effort they were unable to get stock out, or bring feed in. Millions of sheep died or were sold for slaughter. Sheep numbers fell to 96 million.  By the end of the War, exports of wool had fallen to 262,000 tonnes, a drop of 32% in seven years. Ironically, supply still outstripped demand and the stockpile in the United Kingdom stockpile reached 10.4 million bales of Australian, New Zealand and South African wool. In 1945, the four governments formed a joint organisation called The U.K. Dominion Wool Disposals Limited. It was set up to market and sell the stockpile, together with future clips, in an orderly fashion to ensure the stability of wool prices.  

With the outbreak of the Korean War in 1950, American demand for wool soared and by the end of 1951 all of the stockpile had been sold, as well as the wool bought in by the organisation at the floor price. On 22 January 1952, the joint organisation was voluntarily liquidated.  

Trouble brewing 

With the outbreak of World War II, demand for wool by Britain increased substantially. The Australian and British governments entered into a number of contracts to purchase Australian produce including wool, mutton and lamb at agreed prices. In 1939 the governments of the United Kingdom and Australia arranged for Britain 'to acquire the Australian wool clip for the duration of the War and one full wool season after the cessation of hostilities', surplus to requirements of Australian manufacturers. (Year Book of Australia 1940, p. 962). Similar agreements were reached with South Africa and New Zealand. 

During the War however, agricultural production dropped significantly; partly due to the war effort itself and partly as a rest of prolonged and devastating drought. Farmers were caught in a double bind as all trains were taken up with the war effort they were unable to get stock out, or bring feed in. Millions of sheep died or were sold for slaughter. Sheep numbers fell to 96 million.  By the end of the War, exports of wool had fallen to 262,000 tonnes, a drop of 32 per cent in seven years. Ironically, supply still outstripped demand and the stockpile in the United Kingdom stockpile reached 10.4 million bales of Australian, New Zealand and South African wool. In 1945, the four governments formed a joint organisation called The U.K. Dominion Wool Disposals Limited. It was set up to market and sell the stockpile, together with future clips, in an orderly fashion to ensure the stability of wool prices.

With the outbreak of the Korean War in 1950, American demand for wool soared and by the end of 1951 all of the stockpile had been sold, as well as the wool bought in by the organisation at the floor price. On 22 January 1952, the joint organisation was voluntarily liquidated.  

The second wool stockpile

A Wool Deficiency Payments Scheme was set up in 1971 and a minimum reserve price for wool operated between 1974 and 1991. The aim of the scheme was to stabilise future large movements in wool prices by purchasing wool which did not achieve the agreed floor price and then selling wool later in times of buoyant demand.

In the early 1990s however, a combination of sharp falls in demand and high reserve prices, resulted in the Scheme being suspended in February 1991, when the size of the AWC stockpile reached 4.7 million bales. The scheme could no longer be maintained and the Australian Wool Realisation Commission was set up to manage sale of the wool stockpile. Unlike the UK stockpile after Second World War however, wool prices were not saved by war demand, and returns continued to fall.

Although 1992-93 was a wet season locally, The Long El Nino Drought in the mid nineties added to the heartbreak of farmers. Wool markets saw an excess of production, steadily declining world prices and strong competition between natural and synthetic fibres.

By 30 June 1998, the stockpile was reduced to 1.2 million bales and by October equity in the wool stockpile was finally higher than the level of debt. The last bales were sold on the 9th of August 2001. By then, the Australian wool industry had fallen even further than it had in 1971 when the Deficiency Payments Scheme had been set up.

End of an era

World consumption of wool declined by 10 per cent from an average annual consumption of 1.76 million tonnes in the 1980s to 1.59 million tonnes in the 1990s. This decline occurred while total consumption of apparel fibres, including synthetics and cotton, rose. In 1998, total world fibre consumption was around 46 million tonnes, with synthetics comprising 49 per cent of this figure, cotton 42 per cent, cellulosics 5 per cent and wool only 3 per cent. During the 1990s most of the growth in total apparel fibre consumption was in synthetic fibres and cotton, which grew by 6 per cent and 2 per cent a year respectively.

Wool is a more expensive fibre to both produce and process than cotton or polyester, with production and processing (up to the yarn stage) estimated to be around three times more expensive. In addition, the price of wool fluctuates with changes in both supply and demand.  

In the decade to 1999-2000, Australian greasy wool production fell by 35 per cent, from over 1.0 million tonnes in 1989-90 to 694,000 tonnes in 1999-2000. In the 12 months to June 2001, wool production decreased a further 7 per cent to 645,000 tonnes. The value of wool exports fluctuated around $3.5b over most of the 1990s before dropping sharply from $4.0b in 1997-98 to $2.6b in 1998-99 and then back up to $3.9b in 2000-01. 

Looking ahead

Australian wool producers and their sheep are resilient however, and by the 2000-01 season, they were supplying 9 per cent of total world production and 50 per cent of the fine wool market globally. Australian wool exports increased by 20 per cent in value terms to $3 billion in the 12 months to 30 June 2000. The following year, the value of exports increased a further 31 per cent to $3.9 billion.

The Millennium Drought of 2001 – 09 hit producers hard. Although, demand for Australian wool was high, the nation flock size had decreased significantly. Sheep numbers fell to 68 million in 2009-10, which was the smallest Australian sheep flock size since 1905. In more recent times, the consumption of wool has exceeded production. The Drought was again followed by devastating floods in 2010-11.

Despite these challenges, by 2011, Australia was the largest wool producing country, supplying about one third of world production. Overall, production has continued to fall globally and 2015 was the lowest point in seventy years.

Wool producers have had to face significant changes over the last decade, including a decline in the underlying demand for wool, changes to wool marketing arrangements, disruption of traditional international markets, and strong competition from other fibres, all of which have had a major impact on the profitability of the wool industry.

Since 2005, wool prices have risen steadily and demand for Australian wool, especially fine Merino has continued to increase. China is now the largest single market for Australian wool, purchasing over seventy percent of Australia’s wool clip. The European Union, predominantly Italy, accounts about a third of Australia’s wool exports.  

References 

Lee, T. Wanganella and the Merino Aristocrats (Hardie Grant Books, Melbourne 2011)
Chalmers, B. The Sunlit Plains Extended (The Conargo Shire, 2007) 
Massy, C. Breaking the Sheep’s Back (University of Queensland Press, 2011)