Australian Dollar Limiting Wool Return

Australian wool producers are the victims of a high Australian dollar, which is eating away their returns despite buyers paying top dollar.

The Western Region indicator continued to fall last week after the two-week Easter recess, to close 5c lower at 951c/kg.

Over the past ten weeks the WA market has slipped by more than a dollar. Australian Wool Innovation

Economist Paul Deane said the fall was purely currency related. Mr. Deane told farmers at the Primaries information days last month that wool prices were still at a 20-year high in US dollar terms.

“International wool buyers are actually paying high prices for their wool, it is just that farmers are not seeing it,” Mr. Deane said.

“Prices have come off in the last month or two but this is due to the high Australian dollar.”

However, the outlook for wool was still positive with the apparel side booming over the past 12 months, driven by short supply and strong demand.

“Strong economic macro conditions, favorable fashion trends and lack of stock at early stages of processing are pushing the demand,” Mr. Deane said.

“On top of this the supply is down with sheep numbers unlikely to rebound sharply over the coming two seasons.”

Low supplies in Australia had not seen a global supply response, with apparel wool production seen as “Australian centric”.

This was a positive thing for Australia, with low supplies were pushing prices up.

“In 06-07 we had stocks on hand to help us through the season but this year we won’t,” Mr Deane said.

“The auction offering is down about 12pc-13pc with production falling and stocks are already well down both in-store and on-farm.

Source: Yarnsandfibres.com