Australian wool production has almost halved since 1989/1990 and is expected to decline a further 7% this season.

Poor prices over the past decade and, more recently, strong sheep meat prices, have steadily reduced the Australian flock to its lowest since 1950. New Zealand’s sheep numbers are at their lowest for 40 years, with the world’s second largest producer expected to produce 6% less in 2001/2002.

Also, output in the UK is forecast to decline by 18% after more than three million sheep were slaughtered last year to control the spread of foot and mouth disease.

If the Chinese start buying again and there is a global recovery later this year, then the market could move significantly higher.