July 15, 2003
Wool Prices Volatile
In the United States wool trading slowed in May due to lower demand, lower prices, the weak U.S. Dollar and world price volatility. Chris Wilcox, chief economist with Woolmark, remarked, "We will see these big swings in prices from week to week and until we see evidence of an improvement in the global economic conditions and therefore in retail sales we will have this situation for quite some time? (Woolmark 6/2/003).
Demand for raw wool, top and fabric remained light in world markets. Lower global demand is due partly to lower retail demand in China due to SARS. U.S. wool prices were higher than they have been since the 1980s, although there was some weakening of prices in May. U.S. wool producers held onto wool in May, hoping for a price rally.
Grade 64s wool (20.6-22.4 microns) hit a high of $2.60/pound in February before slipping to $2.20/pound by May. Prices, however, remain relatively high. The average price of Grade 64 wool was $1.90/pound in 2002. Grade 60 wool (23.5-24.94 microns) was an average $1.58/pound in 2002, $2.00/pound in January 2003 and $1.92 in May.
The Australian Eastern Market Indicator fell for four weeks to 847 A cents/kg clean, but then rebounded to 916 A cents/kg clean by the end of May. Micron 20 Australian wool in bond, delivered South Carolina, was an average $3.44/pound in the first quarter of 2003, but fell to $2.95/pound in May. Micron 24 wool was an average $3.26/pound in the first quarter of 2003, but then fell to $2.85/pound in May.
Reportedly, the relative profitability of lamb versus wool may mean that more Australian producers will not return to fine wool merino enterprises (Meat & Livestock Australia 5/20/03). The downturn in Australian wool prices in May might have deterred wool producers from reinvesting in their flock.
On a bright note, home building activity in the United States spurred the wool carpet sector in the United States and the portion of wool in carpets increased. In February 2003, wool consumption in floor covering increased 31 percent over the course of a year (Woolmark 5/2003). In May there was some indication that the housing market may be slowing down.
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