Lanolin's 2026 Supply Was Decided by a Drought, Not an Order Book

The supply is announced a year in advance

In December 2025 the Australian Wool Production Forecasting Committee published its third forecast for the 2025/26 season: 244.7 million kilograms of shorn wool, greasy. That is 12.6% below the 2024/25 estimate, and it is a 6.9 million kilogram downward revision on what the same committee forecast in August 2025 — a cut of that size inside four months.

The state detail is not uniform, which matters for anyone buying on specification rather than on tonnage. Victoria is forecast down 19.0% to 48.2 Mkg, South Australia down 15.9% to 39.8 Mkg, Queensland down 10.9% to 8.2 Mkg, New South Wales down 10.7% to 98.2 Mkg, Western Australia down 7.6% to 41.5 Mkg and Tasmania down 5.4% to 8.7 Mkg. Average cut per head is forecast at 4.33 kg greasy, down 2.7%. AWTA test volumes to the end of November were 10.4% below the prior year, and first-hand wool offered at auction was down 3.9%.

None of that is about lanolin. It is about rainfall, flock numbers and the price of sheepmeat. But lanolin’s supply is a derivative of it, and that is the single most important fact about the ingredient: the 2026–27 lanolin market was determined by a weather pattern, roughly a year before the first purchase order was written.

The arithmetic of the pool

Croda, which supplies pharmaceutical-grade lanolin as Medilan, states that wool grease forms around 20% to 25% of the fleece. Apply that to the forecast clip and the Australian pool for 2025/26 is roughly 48.9 to 61.2 thousand tonnes of wool grease.

That is a pool, not a product. Between the fleece and the ingredient sit scouring — which separates the grease from the fibre and the suint — and then refining into grades. The recovery rate depends entirely on how much of the clip is scoured where the grease can be captured, and a very large share of Australian wool is sold greasy and scoured offshore. Which means the lanolin supply chain does not follow the paddock. It follows the scouring.

This is the point most market descriptions miss. The constraint on lanolin is not the sheep, and it is not the grease content of the fleece. It is the number of operating scouring and refining nodes, and their location — a capacity question that consolidates slowly and cannot be expanded on the timescale of a wool season.

The split that actually prices the market

Lanolin is not one product. At the top sits Wool Fat, a pharmacopoeia article with a named monograph in Ph. Eur. and USP/NF. Croda’s Medilan is made to GMP, is FDA-IID listed, is used at 1–10% in topical formulations and appears in otic, ophthalmic and vaginal preparations. It works because it is occlusive: it slows water loss through the skin rather than adding water to it.

The sourcing detail in Croda’s own product documentation is the part worth quoting: the company sources wool grease in Australia and New Zealand because of the material’s quality and because that origin complies with the TSE risk assessments the pharmaceutical industry requires. The provenance requirement is not marketing. It is a regulatory precondition, and it means the pharmaceutical chain is deliberately kept separate from the bulk scouring chain.

Below that sit technical and cosmetic grades, and below those the crude grease and its derivatives sold into lubricants, leather treatment and industrial applications. These grades are substitutable. The top of the stack is not.

Why a shrinking pool is not a simple price event

The intuition is that a 12.6% cut in the raw-material pool raises the price and everyone pays more. That is only half right, because demand is not one buyer.

On one side, cosmetic formulators have a genuine exit. Lanolin is animal-derived, so any brand positioning itself as vegan or lanolin-free excludes it by definition, and the ingredient’s own sensitiser profile — the wool-wax alcohols are the recognised contact allergens — gives formulators a second reason to remove it. There is a long list of alternative emollients and occlusives, and switching cost is a reformulation exercise rather than a regulatory one.

On the other side, the pharmaceutical buyer has no exit at all. An otic preparation or a topical ointment whose monograph specifies wool fat cannot be reformulated without a variation, and the clinical reason for using it — occlusivity, absence of a need for water, compatibility with compromised skin — is not something the alternatives reproduce exactly.

Put those together and a shrinking pool produces something more interesting than a price rise. It produces allocation. The volume that exists moves towards the buyer who cannot substitute and who therefore accepts the price; the cosmetic buyer receives the derivative, or leaves. In a market with elastic demand and inelastic supply, a supply shock clears by price. In a market where one segment is inelastic and the other is not, a supply shock clears by sorting — and the sort is permanent, because the cosmetic formulator that reformulated does not come back when the clip recovers.

What this means for a buyer in 2026

Three things follow, and they are practical rather than theoretical.

First, contract length matters more than price. If the pool is 12.6% smaller this season and the revision came inside four months, a buyer on spot exposure is not buying lanolin — he is buying a bet on the next AWPFC forecast.

Second, grade provenance is the real moat. TSE-compliant Australian and New Zealand origin, GMP manufacture and a pharmacopoeia monograph are what make pharmaceutical lanolin defensible, and none of them can be bought quickly. A buyer evaluating a second source should be evaluating its audit file, not its price list.

Third, watch the sheep, not the cosmetics market. Wool production forecasts, sheep slaughter numbers and seasonal conditions in New South Wales and Victoria are the leading indicators for a 2027 ingredient contract. Cosmetics industry growth forecasts are the lagging indicator, and they have never once told anyone when lanolin was going to be short.

The number I will not put on this market

There is no lanolin market size in this article. “Lanolin” as a category merges at least four products with four different buyers and four different prices: crude wool grease, technical grade, pharmacopoeia-grade Wool Fat, and the ethoxylated and propoxylated derivatives that are chemically a different material sold into a different application. A single figure that adds them is a value average of a commodity and a regulated pharmaceutical excipient, and it moves for reasons that have nothing to do with the ingredient.

The physical numbers here are more useful and more honest: 244.7 Mkg of greasy wool forecast for one country, 12.6% lower than the season before, and a grease content of 20–25% that puts the Australian pool at 48.9 to 61.2 thousand tonnes. Everything downstream of that pool is allocation.

Frequently Asked Questions

How much lanolin is in a wool clip?

Wool grease is a by-product of scouring, and Croda — which sources its pharmaceutical-grade material from Australia and New Zealand — puts the grease content at roughly 20% to 25% of the fleece. Applied to the Australian Wool Production Forecasting Committee's December 2025 forecast of 244.7 million kilograms greasy for 2025/26, that implies a pool of roughly 48.9 to 61.2 thousand tonnes of wool grease in the Australian clip alone. That is a theoretical pool, not refined output: recovery depends on how much of the clip is scoured, and where.

Is lanolin supply elastic?

No. Lanolin availability is set by how much wool is shorn and scoured, not by the price of lanolin. Sheep are not reared for their grease — Croda notes it forms only a very small part of the wool's value, and that shearing is required for animal welfare regardless. A price signal cannot increase the clip within a season, which makes the supply curve effectively vertical in the short run and makes lanolin a price-taker from the wool market rather than a price-setter.

Why is pharmaceutical-grade lanolin different from cosmetic-grade?

Because it is a pharmacopoeia article with a named monograph — Wool Fat — and a documented supply chain. Croda's Medilan is manufactured to GMP, complies with Ph. Eur. and USP/NF, is FDA-IID listed, and is used at 1–10% in topical formulations and in otic, ophthalmic and vaginal preparations. The company sources its wool grease specifically from Australia and New Zealand to satisfy the TSE risk assessment the pharmaceutical industry requires. Those provenance and documentation requirements are what separate the grade, and they are not something a new entrant can switch on.

Is the vegan cosmetics trend a threat to lanolin demand?

It is a threat to the cosmetic half of the demand base, not to the pharmaceutical half. Lanolin is animal-derived, so formulations marketed as vegan or lanolin-free exclude it by definition, and formulators have a long list of alternative emollients to reach for. A pharmaceutical ointment or an otic preparation does not have that freedom: the monograph specifies the material. The consequence is that a shrinking raw-material pool is allocated increasingly to the buyer who cannot substitute, which is the opposite of how a normal ingredient market behaves in a demand-led downturn.