Wool Prices to Stay High

January 18, 2008 - Wool prices have risen to their highest in five years because of buying from China and concern that demand will outstrip supply, stated multiple Australian media sources.

The benchmark Eastern Market Indicator rose 2.3 percent last week, reaching 1028 cents a kilogram as sales resumed after the holiday break. That's the highest prices since April 10, 2003, and the biggest weekly gain since the week to Oct. 19, 2007. This week, the indicator is up another 10 cents to 1038 cents a kilogram. Some experts are tipping prices of more than 1100 cents a kilogram, as overseas buyers' battle for tighter wool supplies.

Michael Dekleuver from the wool broker company of Rodwells, says the market should stay very competitive.

"Very, very positive, I'm certainly very confident of the next six months," said Dekleuver.

Australian wool production may fall to a 62-year low in fiscal year 2008 as Australia's record drought forces farmers to reduce flock numbers. Australia is the world's largest exporter and producer of wool and China its largest customer.

"China remains the dominant buyer--they are a major powerhouse and they continue to draw stocks out of Australia," said Steven Read, general manager of rural services with ABB Grain. "Unless something dramatic happens in the marketplace we are in for quite a good run."

China bought 58 percent of Australia's wool between July and November, said Chris Wilcox, chief economist at Woolmark. Output is expected to be 395,000 tons in the 12 months ending June 30, 2008, according to research and development group Australian Wool Innovation. That's 7.3 percent less than last year and the lowest since 1946.

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