The below graph may also explain why sheep prices have not fallen during the drought. Sheep numbers in Australia peaked in 1990 at around 173 million head. They have been in steady decline ever since and today the flock is only around 72 million head. With an increase in demand for our mutton and lamb both domestically and overseas, it is not hard to see why sheep prices remain strong. The decrease in sheep numbers can also explain the steady increase in wool prices. The supply has slowly but surely been decreasing. The drought conditions have meant many young sheep that would normally stay on farm to become breeders, have instead been sent to slaughter. It will take a good few years for sheep numbers to rebuild. In the meantime, we can expect good sheep and wool prices to hang around for the foreseeable future.
The below graph shows just how high wool prices have risen over the last decade.