Australian Wool Growers welcomes strong start to New Year
Recent wool prices have been a welcome start to the 2017 calendar year, with the EMI (Eastern Market Indicator) reaching well above 1400 ac clean/kg. The market has been marked by record highs and even ‘peak’ wool values, yet it is important to understand the previous times wool has achieved these values. This month we place some historical context around the current market and explore supply versus demand.
It has been great to see the current wool market give such a well-deserved return for Merino given that cardings, when combined with skirtings, make up to 25% of a grower’s wool clip.
It is clear that it is not just the fleece wools that are now attractive to buyers, the whole clip is sought after. Prices have been increasing gradually and consistently since 2012 and production has stabilised.
January 2017 the supply of wool continues to be tight, but there is no doubt that demand is largely driving this improved market and has been for about six years as seen in the chart below. The overseas teams that AWI/Woolmark has in key markets take particular interest in what appears on catwalks and can report large amounts of wool coming down runways.
These conceptual shows manifest themselves in retail stores 12 months after being first sighted in fashion shows. In context, the 2017 prices should give some confidence to growers given these levels have not yet exhausted previous highs, and there is further capacity to build on the prices locally, especially when expressed in US dollar terms (the currency wool is bought in). Given the historically high forward markets for wool, the short to medium term future for wool appears optimistic for woolgrowers.