Wool Price Falls as Buyers Hold Off

Volatility in international markets has created unprecedented fluctuation in the Australian dollar. Financial commentator Alan Kohler says he can't remember a period of fluctuation like the past four months, when the dollar has ranged between 99 and 110 US cents.

The Australian Wool Exchange's Eastern Market Indicator (EMI) fell this week by A$39 cents/kilo, or 3 percent to A$1,235/kilo clean, its lowest value since January. The Australian dollar has continued to weaken and is today at almost parity with the U.S. dollar. The EMI expressed in that latter currency has fallen by no less than 5 percent during the past week, to US$1,236/kilo.

The weakness of the market has again been attributed to the uncertain economic climate, which is influencing a selective demand from buyers, at a time when the supply is ample. The volume offered at market so far this season is 13.5 percent higher than the corresponding total in 2010/11, when wet weather was affecting auction volumes.

The steepest declines were recorded in 17- to 18-micron Merino fleeces, though the 23- and 30-Micron Price Guides in Melbourne also took a hit. The market for good style skirtings was relatively firm, presumably as buyers sought to take up cheaper lots for blending purposes. In general, prices for crossbreds and cardings also faired reasonably well, declining only modestly.

"It's very difficult to predict currencies, because they always do the opposite of what you think they're going to do," Kohler said. "I think it's quite likely that the currency will fall in the short term, but the long-term forecast would have to be higher above parity."

Reprinted in part from Wool Record Weekly