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Prices surge for Australian wool

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Australia’s wool growers are experiencing the best conditions in decades as prices surge to record highs on the back of a solid increase in demand.

The broadest measure of wool prices, the Eastern Market Indicator (EMI), hit 1439 cents per kilo this week, 3 cents above the previous record set in June 2011.

Industry analysts predict the current price momentum is more sustainable than the spike of five years ago, which was driven by shortages caused by the industry’s slump during the global financial crisis.

Australian Council of Wool Exporters and Processors executive director Dr Peter Morgan said the current price rise was backed by solid and ongoing demand in China.

“It looks like supply and demand are in reasonable balance, if anything demand is slightly stronger,” Dr Morgan said. “The current price is the equivalent of $14,390 per tonne, making wool Australia’s highest unit value agricultural commodity. It makes wheat look like chicken-feed.”

The steady gain of the EMI has been largely driven by demand for top-end superfine lines, which have risen by 30 per cent – $4.50 – over the past year.

However, the moves in coarser wool have been more muted, with the margin between fine and coarse cross-bred wool expanding from around 10 to 25 per cent over the past six months.

Dr Morgan said it is a similar story in Western Australia where wool is auctioned out of Fremantle.

Better conditions than 1951 wool boom says grower. Woolgrower Peter Small from Victoria’s western district said the past two or three years are the best he can remember in the industry.

Mr Small runs 6,000 merino ewes at his property at Gritjurk near Coleraine. He is also in the unusual position of being a processor, dispatching wool to a mill and factory in China.

“Back in 2010 when wool was $10 (a kilogram) I made a prediction the price would double before the end of the decade, and I’m sticking to it,” he said.

Mr Small is a big believer in the ongoing strength of China’s appetite for wool, having just returned from another trip to Shanghai to visit his processing operations.

China is the biggest buyer of wool, purchasing around 75 per cent of the clip.

The Chinese expansion has more than filled the void of Italian buyers, who fell from around a 20 per cent market share to less than 5 per cent, having failed to recover from the GFC-inspired industry collapse.

India’s massive textiles industry is growing in importance as well, and now buys almost 10 per cent of Australia’s wool.

Source: ABC Rural

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