Farm wool stockpile grows and so do clip insurance pitfalls

Farm wool stockpile trend prompts insurance alert to producers

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Up to 30 per cent of Australia's wool clip could be stockpiled in wool stores and on farm by year's end, waiting for sale.

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Australia's growing stockpile of unsold wool is tipped to represent almost a third of the national clip by year's end as more producers continue to put off selling into a sluggish auction market.

About 300,000 bales of pre-sale tested wool are now estimated to be sitting in wool stores around Australia.

That represents about 18 per cent of 2019-20's total 1.65 million bale clip.

However, the stockpile is growing on-farm, too, posing rising risks for woolgrowers who, for a decade or more, have not needed to think too much about taking extra precautions to protect their woolshed's contents or inventory.

Since Easter the dramatic drop in market values has resulted in a notable lack of urgency in getting wool to market - Simon Hogan, Elders

"We've not seen this percentage of unsold wool accumulating in store, or on farm, since the 1990s," said Elders wool selling centres manager, Simon Hogan.

"Since Easter the dramatic drop in market values has resulted in a notable lack of urgency in getting wool to market."

Decisions on hold

While the end of the wool sale season often drew slower wool receivals for sale he said some producers were likely to hold more bales at home than usual into the new financial year when they could better assess the market's trends and their own income needs.

"At the moment I don't think a lot of bales would have built up on-farm over the past few months, but in the current economic climate stocks are building up throughout the pipeline - from clothing retailers and manufacturers, to textile mills, wool stores and on farms," he said.

Although wool selling brokers offered their grower clients varying periods of standard in-transit warranty cover between shearing and sale of three to six months, Mr Hogan said brokers' longer term storage fees could typically cost producers $3 to $4 a bale each month, depending on whether their wool was stored in regional or city warehouses.

Insurance representatives said it was no surprise some woolgrowers would opt to keep their clips at home and self insure until they were clearer about selling plans.

Do your homework

But as farm-stored volumes crept up, they were urging producers to think ahead about adjusting their farm insurance cover, even if the clip was only likely to be on farm slightly longer than the usual post-shearing period.

Building fires, bushfires or weather damage were obvious risks to stockpiled wool, but so too was theft, which was an insurance category not normally offered as automatic cover for big ticket items such as stored wool.

It won't take long for people to realise there's a lot more wool sitting around than there has been for some time - David McKinnis, Community Broker Network

This was especially relevant as woolsheds were often hard to secure and located in more remote, less guarded parts of properties.

The increased number of farm-stored bales, each worth $2000-plus would not have escaped the notice of potential thieves.

"It won't take long for people to realise there's a lot more wool sitting around than there has been for some time," said Community Broker Network general manager of strategic partnerships and investments David McKinnis.

"Different insurers's policies are worded differently, so be aware, and make sure the sum insured is adequate."

"Check that your farm contents definition does actually cover wool, and your policy's terms for burglary or theft, (categories) which would normally only cover small equipment such as chainsaws."

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Wool insured against burglary also had to be stored in an adequately locked shed.

As with stored hay or grain, extra premium payments to insure against extra wool being stored on-farm could also be adjusted down mid-way through the year-long contract if the clip was moved off farm.

Alert - thieves at work

Mr Hogan said most warranty payments made by Elders for wool losses in recent times had been for bales taken from sheds overnight.

The longer your wool is on farm the greater the risk from something potentially going wrong - Simon Hogan

Last summer's bushfire season had also claimed some significant bale losses when woolsheds burnt down, notably on South Australia's Kangaroo Island.

"The longer your wool is on farm the greater the risk from something potentially going wrong," he said.

"It could be just a leaking roof after windy weather, which causes water damage to bales over a long period."

Insurers noted vermin and bird damage, or lightning strikes also created risks which caught under insured producers by surprise.

We've had recent reports where Merino lambs were stolen from paddocks in NSW - wool is just as likely to be vulnerable - Emma Thomas, Achmea

Achmea farm insurance chief executive officer Emma Thomas said storm damage or fires tended to be the biggest risk farmers should be most alert to, but wool theft was a real risk too.

"We've had recent reports where Merino lambs were stolen from paddocks in NSW, and wool is just as likely to be vulnerable if thieves know what they're doing."

However, she also did not expect a surge in the farm stockpile because many producers were concerned the wool market could fall further and were more likely to want their wool in brokers' hands ready to take advantage of any positive market moves.

Unsold backlog trend

Andrew Woods at Wagga Wagga-based Independent Commodity Services agreed more wool could stay on farm for longer, but, with some exceptions, he had "not seen evidence of it really happening in a big way in the past, or right now".

Mr Woods said brokers' stores were certainly holding increasing volumes which were micron tested and ready for sale, and based on recent trends that unsold backlog may represent 30pc of total annual production by January.

"There won't be a lot of superfine held back from the market because it's probably too valuable to keep stored, but broader micron wools, including crossbred lines, could be more likely to be staying in farm woolsheds."

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The story Farm wool stockpile grows and so do clip insurance pitfalls first appeared on Farm Online.

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