The Australian wool market is buoyant, with big rises at auction sales this week.
It has been predicted that there may be a slight price adjustment in the next few weeks, but the outlook for the rest of the year remains positive. A correction will many times result when markets rise so quickly, so a flattening may occur as the season continues. However, the second half of the year is likely to demonstrate that wool prices have a little way yet to go.
The wool market added 64 cents (6 percent) to prices, on top of last week's 52 cent (5 percent) price spike, to see the Australian Wool Exchange market indicator close at 1128 Australian cents a kilogram, clean, its highest value since February. In U.S. dollar terms, the indicator increased by 7.5 percent, to 1,026 U.S. cents per kilogram. This is the largest two-week gain in the Eastern Market Indicator since January 2011.
The market behavior this week was similar to last week where prices took a sharp increase from the first few minutes of the sale and continued to firm as the sale progressed. Typically, the market has then taken another step higher after the mid-sale break, which has allowed traders to amend their buying strategy and raise buying limits in order to meet the prevailing market.
Roberts Limited wool manager, Alistair Calvert, said the excitement is spreading beyond the wool-auction room to the futures market, and all the major buyers seem to be scrambling for supply.
"There seems to be some better news coming out of Europe now, which is probably adding a little bit more to the finer end. Also, China seems to be heading for a softer landing than many expected a few months ago, so I think that's good too," said Calvert.
This week the Australian Wool Production Forecasting Committee released its 2013-2014 season outlook, saying it expects Australian wool production to ease slightly this financial year, down 1.4 percent to 345 million greasy kilograms in total.