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