Economic implications of increased wool production

Abstract

The paper analyses the implications of a national annual increase by New Zealand producers of 5% in the production of wool compared with the present long-term rate of increase of 3%. This, it is estimated, would change the rate of world wool production increase from about 2.2% p.a. to 2.6% p.a. and this, it is felt, could be readily absorbed without change in wool price provided the world production of synthetic fibres does not increase at more than about 10% p.a. Over the past 10 years the rate of increase in world synthetics has slowed markedly from 60% p.a. to about 25% p.a. in the last five years. Provided adequate volume and price competition are provided by wool on world markets, the annual rate of expansion of synthetics may well fall to 10% p.a., but if it fell to only 15%, it is estimated that this would cause a wool price decline of only 1/4 d. per lb per annum. It is further estimated that, to preserve stability of lamb prices in the U.K., the rate of increase of lamb exports will have to be confined to 1 % p.a. at most. These factors, together with the increasing demand for mutton by eastern countries, imply, amongst other things, the need for a rapid increase in wool production and a change in the growth pattern of New Zealand primary production so that less reliance is placed on increased lamb production and more on wool and mutton.