Fine wool a bankable commodity

Fine wool produced in Kojonup countered the latest World Bank predictions of non-oil commodity price falls in 2012.

While last week's national 58,000 bale wool market finished 2 per cent lower, it was the 17.5 microns and finer wools that remained firm.

AWEX said the easing of the market, which posted losses in almost all of the indicators, was on the back of a large offering.

"It was a return to pre-Christmas levels for some types, while 17.5 microns and finer were still well ahead (+30 cents)," AWEX said.

Topping Fremantle's Western Market, Kojonup producers Brooks and Janet Evans' Mooringa clip reached a high of 1315 cents greasy for seven bales of 16 micron wool.

Primaries managing director Matt Pedersen said the extremely stylish wool was well recognised and supported by the export buyers.

"The Evans family offered and sold 151 bales, which averaged 16.9 micron for an average price of 997c/kg greasy, or $1804 per bale," he said.

While Mr Evans was very pleased with the sale result, he remains guarded about what is happening in Europe. However, he is confident his family's sheep enterprise is heading in the right direction.

"My father, Chris, began switching our flock to fine wool production in the 1990s," he said.

Mr Evans said the higher rainfall area south-west of Kojonup was ideal for producing a highly nourished fine white fleece.

"We breed our own rams, with an infusion of Yalgoo blood, and select for fleece type, worm resistance and early growth rate," he said.

Recording an extra 100mm of rain last year from their 600mm annual average, the Evans are re-building sheep numbers after scaling back from the previous dry season.

"We usually run 500 breeding ewes," Mr Evans said.

Primaries wool manager Tim Chapman said the Evans' wool clip was the highlight of the sale.

"While 18 micron and broader values dropped a little, it was excellent to see the price board light up as the Mooringa clip was auctioned," Mr Chapman said.

With the World Bank prediction released last week for agricultural commodity price falls of up to 9.3 per cent in 2012, because of falls in global demand, Mr Chapman said there was obvious concern.

The National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said a further 3.3 per cent fall in prices has been predicted for 2013.

"The World Bank thinks that growth in international trade will fall back from 12.4 per cent in 2010 and 6.6 per cent in 2011 to 4.7 per cent in 2012," Mr Wilcox said.

'This slowdown will have the biggest impact on developing countries, notably China, in exporting to high-income countries."

This easing affect may have had a slight impact on Rocky Gully wool producer Ian Higgins' 18.9 average micron wool offering last week.

Mr Higgins and his son Aaron attended the sale to witness the family's Corranup clip reach an average of 903c/kg greasy for 202 bales sold.

Reaching a top price of 1069c/kg for five bales of 18 micron, Mr Higgins said he was pleased prices had held up since last year.

Landmark Albany account manager Noel Hulm said the Higgins' wool production, which is based on 30 years of Billandri bloodlines, consistently performed at the top of the market.

According to the Landmark Wool Weekly report, prospects for wool demand in 2012 will be largely dominated by two factors, the first of which was economic conditions in Europe and the United States.

"Economic growth in the major wool consuming countries is expected to be below the levels seen in much of the past decade," Landmark said.

The report said the second factor affecting wool demand would be competition from fibres that were substantially cheaper and could replace wool in clothing products.

"Although these factors are potentially negative, mill demand for raw wool could be sustained at a reasonable level mainly because stocks are reported to be very low," it said.

This theory will be tested in the next three weeks when Sydney, Melbourne and Fremantle wool bale offerings are reduced by 8.6 per cent over the three sale period compared to last year.

Australian Wool Industries Secretariat Peter Morgan said the national year-to-date offering was 25,208 bales less (-2.4 per cent) than at the end of the same week last year.

"It will move further behind last year in the next three weeks," Dr Morgan said.

Dr Morgan said that while last week's market fell to pre-Christmas levels in Australian currency, it was up by 60 cents in US currency.

"The US exchange rate has appreciated by 5.1 per cent in the same period," he said.