Cable knits and fine merino jumpers took center stage on the runways as Milan’s fall winter shows kicked off, but they may not make such a splash next year.
Wool prices are expected to rise, as the Australian fires prolonged last year’s drought.
“It’s not the fires we are worried about... the sheep may not have anything to eat or drink,” said Ercole Botto Poala, CEO of leading Italian wool textile mill Reda 1865 and president of Italy’s Milano Unica textile fair. “The farmers who can afford it will buy hay elsewhere at a premium and then they’ll raise the prices.”
Fires are raging in Southern regions like New South Wales but haven’t touched most of the key grazing lands aside from farms on Kangaroo Island near Tasmania where about 50,000 sheep perished and farmers resorted to shooting fire-injured sheep to put them out of their misery. Even though fires haven’t actually razed those lands, it’s a clear sign that the drought has no sign of abating in the near term.
“This is the culmination of the year of the drought,” said Fabrizio Servente, Global Strategy Advisor for The Woolmark Company.
Servente explained that during the last month of 2019, a kilo of wool was trading at about $15.50 Australian dollars. The type of wool luxury mills purchased was trading at about $17 AUD. Servente said that an auction scheduled for later this week, should provide pointers, as to how wool will fare over the next few months.
Amid a trade war between the United States and China, wool prices were actually trading at a record low as the Chinese backed off of the Australian commodity. The drought drove production down by 15percent in 2019. That is expected to drop at least another 10 percent over the next year, Servente said.
Across the globe, mills are expected to feel the squeeze of rising wool prices which will ultimately raise the retail cost of wool across the board. Luxury mills in Italy that have perfected the method of refining raw wool fibers, welcome rising demand, he added. “It renders the product even more exquisite.”
One of those firms is Piacenza Cashmere, a Biella-based mill currently run by the family’s 13th and 14th generation. “Merino wool is a noble fiber and so we aren’t worried about price hikes. If production of Australian wool is down we can always source from Argentina or other places,” said Ettore Piacenza, who heads the company’s raw materials department. Piacenza makes 70 percent of its revenues from cashmere it sources from the highlands of Peru and Mongolia, while 30 percent of its business comes from the production of merino wool fabrics.
Luxury brands like Reda and Ermenegildo Zegna are lucky enough to have their own farms. Zegna’s is Achill, a 6,100-acre farm about 40 minutes east of Armidale, Australia. The family run company said none of its sheep have been harmed the blaze.
For historic firms like Zegna, owning their farms allows them to have a close relationship with farmers and the raw materials, even though it doesn’t necessarily satisfy all of their production. Zegna, as well as Reda and many others, do business with suppliers all over Australia.
For now, the future is uncertain, said Botto Poala, whose family run company has weathered wars and natural disasters for over a century. When asked how companies like his are facing the Australia crisis, his response was short but direct.
“We are hoping it will rain.”