Wool industry shows signs of ongoing strength

30 Dec, 2011 02:00 AM
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IT has been a strong year for the Australian wool industry and after 20 hard years, the industry is finally finding its feet again.

Elders WA wool co-ordinator Danny Burkett said the previous 12 months has seen a robust wool market in which growers selling in the latter half of the year again received reasonable and fair returns, on top of good returns at similar times last year.

With the EMI (Eastern Market Indicator) opening at 1152 cents per kilogram at the first sale for the year back in January the outlook for the year was promising.

Given the opening figures, the year has seen the 21 micron indicator climb to a 25 year high with the EMI sitting at 1436c/kg back in June.

Mr Burkett said that while the 21 micron indicator had fallen to a level around 1300 cents clean since June, most micron categories hit similar highs, and this has gone a long way to helping growers recoup some of their ever increasing input costs.

"The biggest plus as I see it, is a market that has defied the European crisis and a slow American economy and offered growers solid pricing opportunities, both in the forward and physical markets."

Executive director of the Australian Council of Wool Exporters and Processors, Peter Morgan, said if producers had been offered the current EMI, which was valued at 1185c/kg as of last Wednesday, 18 months ago, they would have taken it, compared to the average over the last 20 years.

"Things that were probably driving the market were shortage of supply, growth of the Chinese market and the normal cycling factors," he said.

"Wool is definitely in fashion, the campaign for wool with Prince Charles as patron, helped create a bit of a buzz that the wool industry hadn't had for a long long time and all of this happened in spite of the general economic difficulties throughout the world.

"Although the market has eased since August, given everything that's happened and a high exchange rate, to have a current EMI at 1185 cents is great.

Primaries wool manager Tim Chapman said the global financial markets showed extreme volatility throughout the first half of the selling season with Europe and other wool importing countries struggling to remain stable.

"This, with the slowing down in the retail sales sector and the lower demand for certain fine types in particular, certainly played a major role in the marketplace," he said.

"Looking for highlights this year since June has been limited, but we did see two main rises in this period.

"One in September and one in November. Both of these rises were encouraging and shows the market was stabilising at these levels.

"The other highlight was the strength of the carding market and French combing types which have been strong for most of this year's season.

"Historically markets have strengthened through the second half of the season and with reduced sheep numbers and less wool being available due to the very dry summer conditions.

"Last year's supply should reflect a positive outcome on values as long as the financial crisis can be stabilised.

Mr Burkett agreed, and believed supply to be one of the keys to the success of this year's market.

"Supply coupled with good demand from Asia, most notably China, are important factors," he said.

"Looking at the previous decade the major events that have sent the market into a nose dive were the Asian financial crisis and the SARS event, however with China pushing a solid economy, the wool market has been relatively stable at this stage and at good levels."

With prices still comparatively high compared to the last few years Mr Burkett said it was difficult to forecast and offer best judgements as to the direction of the market.

"All markets have a life of their own and it's this point that should have wool growers looking at forward pricing opportunities," he said.

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