Tight supply tipped for start of year

Wool supplies are expected to be lower in the first six months of 2012 compared with the 2010/11 season.

The National Council of Wool Selling Brokers executive director Chris Wilcox said supply would be tight as many growers sold-off all their wool stocks held on farm during the high prices of March to June period of 2011.

"The wool market enters the second half of 2011/12 with a delicate balance between supply and demand," Mr Wilcox said.

He said demand would be influenced by the debt crisis in Europe and the impact on consumer purchases in that region. "This will affect not just mills in Europe, but also those in China and India."

Offsetting this uncertainty and prospects for a weakening demand, Mr Wilcox said economic conditions in the US appeared to be improving a little.

"Recent economic data from the US have been quite positive," he said.

This is backed by latest US unemployment figures falling to 8.5 per cent, the lowest since early 2009.

Mr Wilcox said a further factor influencing demand in the next six months was likely to be the relativities of wool prices between cotton and synthetic fibres.

"While wool prices have fallen by 21 per cent since the start of the season, cotton prices are down by 28 per cent and synthetic fibres prices have fallen by 20 per cent."

He said the wool-to-cotton price ratio at the end of December was 6.35, well above the 10-year average of 4.65.

Mr Wilcox added that the wool to synthetic fibre price ratio was 5.62; also well above the 10-year average of 3.75.

"This provides incentives for mills to use less wool and more cotton or synthetics."

Wool sales open this week after the three-week Christmas recess and AWEX Western Region technical controller David Aslett said 12,000 bales were rostered for sale in WA.