WOOL producers have been warned that a strong wool market could be short-lived if prices got out of hand.
The AWEX market indicator recorded its fifth consecutive weekly rise last week when it jumped 9 cents to settle on 1045c/kg.
Things were looking even better in the west after the indicator hit 1053c/kg, a rise of 57c/kg since the first sale of 2008.
However European processor Laurence Modiano said prices were being driven by lack of supply, which in turn was causing processing machinery to remain idle.
“Lower processing volumes coupled with higher wool and production costs have created huge difficulties for the worldwide pipeline,” Mr Modiano said.
“As a result, mills are reducing or closing, with the consequence that there are fewer buyers for Australian wool.”
Mr Modiano said wool combing was down nearly 20 per cent in Europe last year and the situation in China was far from bright.
“The Chinese textile sector is suffering from tighter lending policy, higher labour and environmental costs and lower demand from its traditional market in North America,” he said.
The anticipation of a major US economic turndown together with price rises for food and oil would mean consumers would have less to spend on what they perceive as nonessential items, such as wool garments.
“The main issue is one of excess processing capacity over wool production and resistance at retail to accept high prices for what is a non-essential commodity,” Mr Modiano said.
“My guess is that if wool prices continue to rise more players will leave the industry.”
”So now is the time, more than ever, when we need to invest in marketing the unique qualities of Merino wool.
“We need to grow demand and not rely on lower wool supplies to sustain current prices.
“It is far too soon to be talking of a golden era for wool.”