January 19, 2007
January 19, 2007 - Wool prices are at a four-year high. With this week's rise, the Australian wool market has risen by 48 percent in local currency terms from the low reached in December 2005. In U.S. terms, the gain has been stronger, with the Australian Eastern Market Indicator (EMI) up by $2.75 U.S. per kilogram clean ($1.25 per lb.) or 57 percent.
Chief economist with The Woolmark Company, and speaker at the upcoming American Sheep Industry Association Annual Convention, Chris Wilcox, said the rise was based on strong fundamental demand along with the fear of a looming supply squeeze.
Australian shorn wool production has been falling since its peak in 1988 to 1989. By 2005-2006, it had fallen by half to approximately 1 billion lbs. The latest forecast is that production will fall to 924 million lbs. this year.
Also, with much stronger prices for meat sheep and lambs, many wool producers are crossing their merino ewes with meat-producing breeds to produce lambs for meat.
"So we would have seen another drop in (wool) production this season, but it has been greatly added to by the drought," according Wilcox.
Wilcox expects a 20 percent fall in the amount of wool to be auctioned this autumn compared with last year.
The changes in the EMI in U.S. currencies over the last 14 weeks are now $2.04 U.S. per kilogram clean ($.93 per lb.). This equates to nearly a $1 per pound increase in clean wool prices over this time frame.
"This is positive news for the U.S. growers in that the increase in price is due to changes in the world wool supply, clean pipelines and moderate demand and not solely because of currency exchange rates," stated Rita Kourlis Samuelson, wool marketing director for the American Sheep Industry Association. "As we develop our position in the international market place, it will be crucial that our wools are prepared to the international standards and that the Certified Wool Quality Program be followed in order for U.S. growers to get the most benefit from this price increase." Reprinted in part from The Australian
Staff contact: Rita Kourlis Samuelson, ext. 29