Summary of wool production estimates and forecasts for Australia. 2012/13 4th forecast 78.9

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1 Australian Wool Production Forecast Report Australian Wool Production Forecast Committee April 2013 Summary The Australian Wool Production Forecasting Committee has increased the forecast of shorn wool production for 2012/13 to 350 million kilograms (mkg) greasy, 2.3% above the 342 mkg produced in 2011/12. The increase is due to an expected rise in the number of sheep shorn (+3.3%), partly offset by a 1.1% fall in average wool cut per head. The Committee s first projection for 2013/14 has been set at 345 mkg, down 1.4% from 2012/13, as a result of an expected decrease in sheep numbers and a reduction in average wool cut per head next season. Table 1 summarises the estimates and forecasts. Table 1: Summary of wool production estimates and forecasts for Australia Parameter Opening Sheep Number Sheep Numbers Shorn Average Cut Per Head (kg) 2011/12 Final Estimate % % /13 4th forecast % 78.9 Change y-o-y (%) 3.3% 2013/14 Initial Projection Change y-o-y (%) -0.9% -0.6% % % For 2012/13, the upward revision of forecast greasy wool production reflects reports from state committees and recent data such as Australian Wool Testing Authority (AWTA) year on year pre-sale wool test data (+3% till end March). Wool production gains for 2012/13 are a result of year on year increases in New South Wales (+2.6%), South Australia (+3.3%) and Western Australia (+7.4%). These have more than offset the slight decreases in wool production in Victoria (-2.3%), Tasmania (- 1.8%) and Queensland (-0.3%). Table 2 summarises the estimates and forecasts. A FURTHER INFORMATION Mr Russell Pattinson, National Committee Chairman Tel: Australian Wool Innovation Limited April This document may be reproduced and disseminated with attribution to Australian Wool Innovation Limited (ABN ). DISCLAIMER AWI Limited makes no representations about the content and suitability of the information contained in these materials. Specifically, AWI does not warrant, guarantee or make any representations regarding the correctness, accuracy, reliability, currency, or any other aspect regarding characteristics or use of information presented in this material. The user accepts sole responsibility and risk associated with the use and results of these materials, irrespective of the purpose to which such use or results are applied. In no event shall AWI be liable for any loss or damages (including without limitation special, indirect, or consequential damages), where in an action of contract, negligence, or tort, arising out of or in connection with the use of performance of these materials.

2 more detailed comparison of greasy wool production by state can be found in Table 2 in the Appendices to this report Table 2: Summary of wool production estimates and forecasts for individual states QLD NSW VIC TAS SA WA National 2011/12 Final Estimate /13 April Forecast Change y-o-y (%) -0.3% 2.6% -2.3% -1.8% 3.3% 7.4% 2.3% Forecast for 2013/14 The Committee s first forecast for 2013/14 shorn wool production is 345 mkg greasy 1.4% lower than its forecast for 2012/13. This decrease is largely due to an expected: - Decrease in opening sheep numbers (-0.9%), as a result of increased sheep and lamb slaughtering s this season; and - A reduction in average wool cut per head (-1.4%) as a result of the dry seasonal conditions being experienced across many woolgrowing regions. In keeping with normal Committee practice, this first forecast for greasy wool production has been rounded to the nearest 5 mkg greasy. The expected decrease in sheep numbers is in line with the MLA forecast. Major data inputs These forecasts are based on detailed consideration by the state and national committees of current seasonal conditions, information gathered on sheep producer and wool grower intentions, including the MLA/AWI Lamb Survey results, AWTA test data, ABS sheep and lamb turn-off, National Livestock Recording Service yardings data and AWEX auction statistics and matched brand analysis. ABS data Table 3 summarises ABS flock statistics. While ABS opening sheep numbers for 2012/13 were 72.5 million (m), a decrease of 1% from the 2011/12 season, both MLA and AWI believe this is an underestimate of opening sheep numbers. Accordingly MLA and AWI estimate the opening sheep numbers for 2012/13 at 75.1m (+2.6m).

3 Table 3: ABS National flock numbers ABS data % Δ Flock (million head at June): % Breeding ewes: % Lambs marked: NA % Ewes mated: NA 37.7 NA 37.4 NA - Marking % NA 85% NA 89% NA - National ABS sheep turn-off statistics from Australian farms are shown in Table 4, for the financial year to date (to end February 2013), compared to the equivalent period in 2011/12 and the corresponding year-to-date average for the five years 2007/ /12. Table 4: ABS Sheep turn off data for 2012/13 (Financial year-to-date) Sheep slaughter ('000 hd) Sheep weights (kg/hd cwt) Mutton production (tonnes cwt) Lamb slaughter ('000 hd) Lamb weights (kg/hd cwt) Lamb production (tonnes cwt) Live exports (hd) Parameter Financial year to-date 5-yr FYTD to Feb 11/12 to Feb 12/13 % Δ Jan avg. % 3,627 5,202 43% 5,558-6% % % 85, ,281 40% 123,987-4% 12,352 14,019 13% 13,024 8% % % 270, ,828 12% 274,163 11% 2,174,089 1,781,824-18% 2,973,983-40% The ABS data show considerable increases in financial year-to-date sheep and lamb slaughter, and a decrease in live exports. When compared to the longer term (5 year) average slightly reduced adult sheep slaughter (-6%), mutton production (-4%), and significantly reduced live exports (-40%) are evident. There is also evidence of increased lamb slaughter (+8%) when compared to the longer term average. AWTA wool test data (Financial year-to-date) Following the August National Committee meeting, AWTA developed a specific Key Test Data report for wool production forecasting purposes. This report generates monthly greasy test volumes within diameter categories. Comparative year-to-date results are shown in Table 5 and Figure 1, based on this new report.

4 Table 5: Parameter AWTA WSA FYTD Total gr. Tons Comparison of financial year-to-date AWTA wool test volumes (to end of March) Year TOTAL /11 4,879 14,216 32,222 48,752 52,276 39,176 24,355 15,158 8,166 11,059 16,224 15,158 9, , /12 5,476 16,012 33,145 47,185 45,292 34,261 22,986 15,050 8,299 11,878 16,769 13,998 9, , /13 6,990 18,953 37,021 49,569 48,728 35,533 21,788 11,977 6,822 13,608 18,656 12,228 7, ,103 YTD - YOY% 2012/13 28% 18% 12% 5% 8% 4% -5% -20% -18% 15% 11% -13% -26% 3% The AWTA data presented in Table 5, Figure 1 and Figure 2 (overleaf) indicate that: - Financial year-to-date wool test volumes are presently 3% higher than for the same period in 2011/12; - Increases in year-on-year production volumes are greatest in Superfine, fine and medium Merino (< 21.5 µm) and cross-bred ( µm) diameter categories; and - Decreases are reported in medium ( µm) and coarse cross-bred (>28.5 µm) diameter categories. Figure 1: Comparison of monthly wool test volumes

5 Figure 2: Across-years comparison of wool diameter profile AWI production forecasting model (forecast to end of June 2013) As detailed in the December 2010 report, AWI has developed a statistical forecasting methodology which utilises the new AWTA data as a contribution to the AWPFC process. Table 6 outlines the results of the AWI production modelling based on AWTA wool test data to the end of March Table 6: Australian wool production estimates and forecasts, derived from AWI forecasting model and AWTA WSA based test data Year TOTAL Total FY1213 7,104 21,105 44,186 61,244 58,746 42,316 28,450 16,692 11,120 16,844 21,935 16,748 11, ,981 change YOY 13.8% 10.6% 8.8% 5.5% 4.5% 1.4% 1.6% -7.4% 12.7% 17.2% 11.1% 5.9% 2.4% 5.6% Diam % 2.0% 5.9% 12.3% 17.1% 16.4% 11.8% 7.9% 4.7% 3.1% 4.7% 6.1% 4.7% 3.2% For 2012/13, the AWI forecasting model is suggesting overall production of around 358 mkg greasy, which represents a year-on-year production increase of 5.6%. Note: this includes approximate 5% retest rate, projection shows actual production for 2012/13 at 340 mkg.

6 AWEX matched brand analysis According to AWEX matched brand analysis, overall, first hand bales offered were 2.4% higher this year compared to last year, with increases in Northern (+2.0%), Southern (+1.4%) and Western (+5.9%) centres. Bureau of Meteorology (BOM) seasonal outlook Many wool growing regions of Australia have experienced very dry conditions over recent months. Looking forward, the Bureau seasonal rainfall outlook for late Autumn/mid-Winter 2013 is shown in Figure 3. Figure 3: Chance of exceeding median rainfall (May to July 2013) The southern half of Queensland and northern NSW are forecast to have a wetter than normal season for May to July 2013, while Tasmania, most of Victoria and south-east South Australia are more likely to have a drier than normal season. Agricultural regions of Western Australia, the northern half of South Australia, and the west and south of New South Wales are forecast to have an average season. The BOM is predicting most of southern Australia, including agricultural regions of Western Australia, is more likely to have warmer days in the May to July 2013 period, as show in figure 4.

7 Figure 4: Chance of exceeding the median maximum temperature (May to July 2013) State committee inputs The following provides a summary of conditions in each state as reported by State Committees in April Most states need rainfall in the next few weeks, otherwise further increases in sheep and lamb turn-off are expected as a result. Queensland The Queensland State Committee increased the 2012/13 forecast for opening sheep numbers, number of sheep to be shorn, fleece weight and shorn wool production compared to the previous forecast. The fleece weight is forecast to be 1.3% above 2011/12 levels, as a result of more young wethers on farm and the high proportion of Merino in flocks. For 2013/14, the Committee felt at this stage greasy wool production and sheep numbers would remain stable. New South Wales The New South Wales State Committee increased the 2012/13 forecast for greasy production volumes, reflecting a slightly lower fall in fleece weights than previously expected.

8 For 2013/14, the Committee forecast a decrease in opening sheep numbers and number of sheep to be shorn due to increased slaughterings this season, and a decrease in fleece weight due to the dry seasonal conditions being experienced. This is expected to lead to a fall in shorn wool production. Victoria The Victoria State Committee maintained their previous 2012/13 forecast. For 2013/14, the Committee forecast a slight decrease in opening sheep numbers and number of sheep to be shorn due to increased slaughterings this season and a slight decrease in fleece weight due to the dry seasonal conditions. This is expected to lead to a fall in shorn wool production. Tasmania The Tasmania State Committee maintained their previous 2012/13 forecast. For 2013/14, the Committee forecast a decrease in fleece weight due to the dry seasonal conditions which will decrease shorn wool production. Opening sheep numbers and number of sheep to be shorn are unchanged. South Australia The South Australia State Committee maintained their previous 2012/13 forecast. For 2013/14, the Committee forecast a decrease in opening sheep numbers due to increased slaughterings this season and a decrease in fleece weight due to the dry seasonal conditions. This is expected to lead to a fall in shorn wool production. Feed and surface water will be big issues over the next few months. Western Australia The Western Australia State Committee has adjusted the 2012/13 forecast for greasy wool production upwards compared to their previous forecast, reflecting an increase in the number of sheep to be shorn. For 2013/14, the Committee forecast a decrease in number of sheep shorn and fleece weight due to the dry seasonal conditions. This is expected to lead to a fall in shorn wool production.

9 Appendixes Table 1: Changes to recent state level forecast for 2012/13 wool production 2012/13 3rd forecast (Dec-12) Opening Sheep Number Sheep Numbers Shorn Average Cut Per Head (kg) QLD NSW VIC TAS SA WA National /13 4th forecast (Apr-13) Opening Sheep Number Sheep Numbers Shorn Average Cut Per Head (kg) QLD NSW VIC TAS SA WA National Change (%) QLD NSW VIC TAS SA WA National Opening Sheep Number 2.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% Sheep Numbers Shorn 2.9% 0.0% 0.0% 0.0% 0.0% 1.0% 0.3% Average Cut Per Head 1.6% 1.4% 0.0% 0.0% 0.0% 0.0% 0.5% 4.4% 1.4% 0.0% 0.0% 0.0% 1.0% 1.4% Table 2: Comparison of the 2011/12 estimate against the 4 th 2012/13 production forecast 2011/12 Final Estimate Opening Sheep Number Sheep Numbers Shorn Average Cut Per Head (kg) QLD NSW VIC TAS SA WA National /13 4th forecast (Apr-13) QLD NSW VIC TAS SA WA National Opening Sheep Number Sheep Numbers Shorn Average Cut Per Head (kg) Change % QLD NSW VIC TAS SA WA National Opening Sheep Number -1.5% 4.2% 0.6% -1.9% 2.6% 4.3% 2.7% Sheep Numbers Shron -1.5% 3.8% 0.2% -1.9% 7.4% 5.7% 3.3% Average Cut Per Head -1.5% 3.8% 0.2% -1.9% 7.4% 5.7% 3.3% -0.3% 2.6% -2.3% -1.8% 3.3% 7.4% 2.3%

10 Historical Australian Production Figures Table below provides historical sheep numbers, wool production and fleece weight statistics since 1991/92 for background information. Table 3: Australian wool production statistics since 1991/92 Year Opening Sheep Number Sheep Numbers Shorn Explanation of revised AWPFC data series Average Cut Per Head Shorn Wool Production (kg) f f At the December 2005 meeting, the national Committee made the decision to collate and review the key variables (shorn wool production, cut per head, number of sheep shorn) used in the committee from the available industry sources and to create a consistent historical data series at both a state and national level. This was required as some differences existed between industry accepted figures and the AWPFC data series and to ensure a consistent methodology over time. This process resulted in changes to the parameters average cut per head and the number of sheep shorn for some seasons at both a state and national level. Modus operandi for the AWI Production Forecasting Committee The AWI Wool Production Forecasting Committee draws together a range of objective data and qualitative information to produce consensus-based, authoritative forecasts four times a year for Australian wool production.

11 The Committee has a two-level structure, with a National Committee considering information and advice from state sub-committees. It is funded by Australian Wool Innovation Limited, which also provides an independent representative in the role of the Chairman of the National Committee. The National and state sub-committees comprise wool producers, wool brokers, exporters, processors, private treaty merchants, AWEX, AWTA, ABARE, ABS, MLA, DPI and The Woolmark Company. The Committee releases its forecasts in the forms of a press release and a report providing the detailed forecasts, historical data and commentary on the key drivers of the forecasts.