Wool is light, warm, absorbs moisture, and is resistant to fire. Wool is also used for insulation in houses, for carpets and furnishing, and for bedding. Sheep are sheared once a year and produce about 4.3 kg of "greasy" wool per year.
Greasy wool is wool that has not been washed or cleaned. Wool fineness is determined by fiber diameter, which is measured in microns (one millionth of a meter). Fine wool is softer, lightweight, and produces fine clothing. Merino sheep produce the finest wool.
Wool futures and options are traded on the Sydney Futures Exchange (SFE), where there are futures and options contracts on greasy wool, and futures on fine wool and broad wool. All three futures contracts call for the delivery of merino combing wool. Wool yarn futures are traded on the Chubu Commodity Exchange (CCE), the Osaka Mercantile Exchange (OME) and the Tokyo Commodity Exchange (TOCOM).
Prices - Average monthly wool prices at U.S. mills in 2007 (through September) rose sharply by +47.8% yr/yr to an 18-year high of $2.65 per pound. Wool prices in 2007 are about 143% higher than the 3-decade low of $1.09 posted in 2000. The value of U.S. wool production in 2005 (latest data available) was $26.272 million, up 72% from the record low of $15.311 million in 2001.
Supply - World production of wool has been falling in the past decade due to the increased use of polyester fabrics. Wool production in 2002, the latest reporting year for the data series, fell -1.4% yr/yr to a new record low of 1.292 million metric tons. The world's largest producers of degreased wool in 2002 were Australia with 31% of world production, followed by New Zealand (15%), and China (12%).
U.S. wool production of 10,000 metric tons in 2002 accounted for only 0.8% of world production. U.S. production of wool goods fell -25.2% yr/yr in 2007 (6 months annualized) to a record low of 10.2 million yards. That was less that 5% of the record high of 222.5 million yards of wool goods production seen in 1969. The U.S. sheep herd in 2006 fell -3.4% to a new record low of 4.900 million sheep.
Demand - U.S. consumption of apparel wool has dropped sharply, along with production, and it fell -13.5% yr/yr to a record low of 13.333 million pounds in 2006. The breakdown of U.S. mill consumption in 2003, the latest data available, showed that wool usage for carpets was 6.017 million pounds, which was a new record low. Wool usage for apparel production was 43.869 million pounds, up +21.8%, up from the 2002 record low of 36.015 million pounds.
Trade - U.S. exports of domestic wool in 2006 rose +45.2% yr/yr to 18.000 million pounds. U.S. imports in 2006 rose +17.8% to 7.324 million pounds.