Wool Prices Take a Reality Check

The Australian wool market has hit a check in pricing after 11 weeks of solid price gains, amid stagnant demand for worsted suiting products from international consumers and a surging Australian dollar tipped to climb over US80c.

Australian wool prices have marched largely in step with other strengthening commodity markets over the past two months, but Platinum Agribusiness principal Bill Mitchell says last week's drop of 22 cents in the Eastern Market Indicator and signs of similar falls this week represented a "reality check" rather than a downturn.

"The market got ahead of itself, there needs to more than reduced supply to help a market go up," Mitchell said.

Mitchell said the long-term picture remained "pretty bullish", however the "bigger picture was more about demand" and the ramifications of a crippled retail sector.

Khan Horne, general manager of agribusiness for National Australian Bank, is less optimistic, as he believes any signs of recovery in the global economy are premature as far as Australia is concerned.

"Unfortunately, the full extent of the Global Financial Crisis is yet to filter through, with household incomes in both United States and European Union expected to contract over the remainder of the year," Horne said.

"Combined with the anticipated strengthening of the Australian dollar, further increases in wool and sheep meat prices in the short-term remains limited."

The biggest declines this week were among the finer wools, which were down around 5 percent, compared with 20-24 micron wools, which were down 2 percent to 3 percent. Observers pointed to the falling demand for finer wools, especially in Europe.

Last week the AWEX-EMI indicator dropped 22 cents to finish at 812 cents a kilogram, or three cents higher in U.S. terms.

Reprinted in part from Stock and Land

<< Back