Executive Briefings

Wool Is Cool Again, and the Prices Are Shear Madness

Wool isn’t just for winter wear anymore, and its use in everything from shoes to underwear briefs is pushing prices of merino, the most popular type of wool fiber for clothes, to near-record highs.

Wool sneakers popular in Silicon Valley from startup Allbirds Inc. helped kick off a global trend. Brands from Adidas to Lululemon and Under Armour are selling wool apparel, touting the fiber’s soft feel and odor-resisting properties. Merino wool, named for a breed of sheep, is even being woven into shorts, tank tops and short-sleeve T-shirts.

Demand has helped drive up merino wool prices at a time when the sheep population in Australia and New Zealand, the world’s largest wool exporters, is near a 100-year low. Many sheep farmers here invested in converting their operations to dairy farming or higher-yielding crops after prices of wool collapsed in the 1990s.

In Australia, which produces the bulk of merino wool used by major clothing brands, benchmark wool prices were recently around $14 a kilogram in U.S. dollar terms, up 56 percent from 2016. Prices last peaked in 2011, when an Australian dollar was more valuable than a U.S. dollar. Now, it is the reverse, indicating that supply-and-demand is the primary force boosting merino prices.

Some manufacturers say the limited supply of high-quality wool is creating sourcing challenges.

“It’s a natural material so you can’t just crank up machines and produce more,” said Nicola Simpson, chief operating officer at Icebreaker, a clothing brand that recently agreed to be acquired by VF Corp., the Greensboro, N.C., apparel company, for undisclosed terms.

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Wool sneakers popular in Silicon Valley from startup Allbirds Inc. helped kick off a global trend. Brands from Adidas to Lululemon and Under Armour are selling wool apparel, touting the fiber’s soft feel and odor-resisting properties. Merino wool, named for a breed of sheep, is even being woven into shorts, tank tops and short-sleeve T-shirts.

Demand has helped drive up merino wool prices at a time when the sheep population in Australia and New Zealand, the world’s largest wool exporters, is near a 100-year low. Many sheep farmers here invested in converting their operations to dairy farming or higher-yielding crops after prices of wool collapsed in the 1990s.

In Australia, which produces the bulk of merino wool used by major clothing brands, benchmark wool prices were recently around $14 a kilogram in U.S. dollar terms, up 56 percent from 2016. Prices last peaked in 2011, when an Australian dollar was more valuable than a U.S. dollar. Now, it is the reverse, indicating that supply-and-demand is the primary force boosting merino prices.

Some manufacturers say the limited supply of high-quality wool is creating sourcing challenges.

“It’s a natural material so you can’t just crank up machines and produce more,” said Nicola Simpson, chief operating officer at Icebreaker, a clothing brand that recently agreed to be acquired by VF Corp., the Greensboro, N.C., apparel company, for undisclosed terms.

Read full article