Wool climbs higher

After years of drought and recent flooding in Queensland, Australian wool prices rallied in the 2010–11 season to give some hope that the industry is back on track.

As overseas wool buyers continued to react to concerns over low supplies, prices continued to climb last week at the opening sales of 2011.

The AWEX Eastern Market Indicator surged by 121c per kilogram to close at 1152c, a level not seen since September 2002.

Australian Wool Industries Secretariat’s Peter Morgan said that in US terms, the EMI continued to set “highest ever” levels this season.

“We are at some 200c above the previous highest value prior to this season recorded 20 years ago, ” Dr Morgan said.

West Borden sheep producer David Bungey welcomed back profitable wool prices, saying it had taken some of the burden off many of those who remained loyal to the industry during recent times of low prices.

“Although prices shot up last week, I am still sceptical about the future, ” he said.

Last week’s closing AWEX Western Market Indicator was 1125c/kg, a rise of 122c since the last sale in December before the three-week Christmas break.

“Although at current prices I will return a wool profit of about $30 a sheep after costs, in reality that is the same price we received with the price peak of the late 1980s, ” Mr Bungey said. “Not many people would be happy to work today for the same wages as those of 23 years ago.

“I don’t see this recent rise as more than a short-term situation, but it would be well deserved to be able to budget in higher prices into the future.”

Wool Agency marketing director Andrew Johnston said current prices should remain sustainable within 100c/kg.

“The luxury market is experiencing exceptionally strong growth, ” he said. “The market opened up stronger at the beginning of this week and exporters are remarkably bullish.”

Mr Johnston said mills were no better off switching to alternative fibres because synthetics and cotton prices had also continued to increase in value.

Landmark’s Wool Weekly report said overseas mills required wool to keep machines running due to low stocks.

“With most business being done ‘hand to mouth’, the long term is still uncertain, reliant on future retail demand, ” Landmark said.