 |
Crops |
|
Livestock |
|
Energy |
|
Metals |
|
|
| Wool | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Caroline Gunning-Trant |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The eastern market indicator (EMI) price for wool is estimated to average 820 cents a kilogram in 2008-09, 13 per cent lower than in 2007-08. This is the result of a decline in demand stemming from the global financial crisis, as waning consumer confidence has dampened retail demand in major apparel wool consuming countries, including the United States, the European Union and Japan. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Prices falling despite depreciation of the dollar | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In late October 2008, the EMI fell below 800 cents a kilogram clean for the first time since October 2006. The significant fall in prices this season can be attributed to the ongoing weakening of demand for wool, which is reflected primarily in the EMI expressed in US dollars. In the first three months of the season, the depreciation of the Australian dollar relative to the US dollar lent support to the EMI in Australian dollars at around 865 cents a kilogram clean. However, after the global financial crisis intensified, the lower value of the Australian dollar was not enough to shield the EMI from the significant decline in demand brought about by expectations of sharply lower international economic growth and falling consumer confidence. There were significant developments in the Australian wool market after the EMI fell below 800 cents a kilogram clean. Auction prices failed to meet many reserves, causing a relatively higher proportion of lots to be withdrawn or passed in. Offerings in subsequent weeks exceeded rostered amounts which contributed to the further decline in prices. The EMI reached a low of 723 cents a kilogram clean in early November. Since that time prices have rebounded by roughly 8 per cent and again, offerings more closely reflect what has been rostered for sale. The EMI is forecast to average 820 cents a kilogram clean in 2008-09, a 13 per cent reduction from 2007-08. Considerable uncertainty remains in the outlook for movements in the EMI. According to Australian Wool Testing Authority (AWTA) key test data, 9 per cent fewer bales were tested between July and November 2008 compared with the same period a year ago, with the decline in November especially pronounced. While it is clearly evident there is a reduction in the size of the clip, there are also indications many producers are not selling their wool in expectation of higher prices at a later date. Recent changes to interest rates in an number of key economies and the financial stimulus packages of the United States, China and the European Union seem to have, to some extent, stabilised consumer confidence in world markets. This has had a positive effect on the Australian wool market, where prices have regained some ground. Despite the downward revision of the annual price forecast since the September edition of Australian commodities, prices are expected to recover gradually into the next quarter, following previous annual trends. However, providing uncertainty to this forecast is the possibility a price increase will lead to large volumes of the wool currently held on-farm and in stores to emerge at auction. Given current relatively weak global wool demand, this could lead to significant price volatility. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Production to be lower in 2008-09 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In light of the ongoing decline in the size of the Australian flock, the changing enterprise mix between wool and sheep meat, and the mixed weather conditions through the wheat-sheep zone, shorn wool production is forecast to fall by 9 per cent to 370 000 tonnes in 2008-09. Lower wool production so far this season is evident in AWTA key test data and the 11 per cent decline in national wool offerings. Despite the dry spring, good winter rains in some parts of the wheat-sheep zone, such as New England and central New South Wales, have resulted in slightly broader and stronger shorn wools this season. AWTA key test data to the end of November indicate the average mean fibre diameter is up slightly in every state except South Australia and Queensland. Staple strength has also improved in all states except South Australia and Tasmania. These improvements in the average quality of the wool being tested are reflected in the slight shift in the proportion of superfine wool in the clip (wool less than 19.5 microns) toward fine wool (wool between 19.5 and 22.5 microns). So far this season, 35.7 per cent of the wool clip is superfine wool compared with 38.4 per cent a year ago. This shift suggests there is a smaller amount of hunger-fine wool in the clip – wool which arose from the poor feed conditions of the past two years – causing the share of superfine wool in the clip to reach record highs. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Global economic slowdown affecting demand | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The United States and the European Union are major importers of yarn, woven fabrics and clothing from China. Sharply weaker US and European economic activity in 2009 is expected to continue to affect 2008-09 orders for semi-durables, such as yarn and apparel. One positive light on the demand side is China. Apart from being the world’s largest processor of raw wool, China is also the world’s largest consumer of wool clothing. Domestic demand in China is expected to remain strong, a factor which should support wool demand through to the end of the financial year despite what is occurring in its export markets for woollen textiles and clothing. However, if China’s economic growth was to slow sharply, then demand for wool from Australia, and the price of wool, would be expected to fall markedly. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exports | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Export volumes of greasy wool fell by 1.4 per cent between July and October 2008. This reflects the ongoing soft global demand for wool. The effect of weaker prices is evident in the lower export earnings, which fell 2.6 per cent relative to the same period in 2007. While shipments of greasy wool to almost all countries declined, one exception to this trend is China, Australia’s largest export market, to which shipments increased by almost 6 per cent between July and October. Australian total wool exports (including greasy wool, semi-processed wool and skins) in 2008-09 are estimated to fall by 9 per cent, to 447 000 tonnes greasy wool equivalent, as a result of both lower demand and lower Australian production. Coupled with lower prices, export earnings are forecast to fall by almost 21 per cent, to $2.22 billion. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Falling fibre prices and wool’s competitiveness | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Wool competes with other fibres on the basis of price, consumer preferences and functionality. Prices for both wool and polyester fibres have been decreasing since July. Polyester prices fell by around 30 per cent between July and November 2008, reflecting the sharp decline in input costs such as oil. However, when compared to wool, polyester has become relatively less competitive. This is evident as demonstrated in the downward trend of the 21 micron wool to polyester price ratio. Between July and November 2008, the estimated 21 micron wool to polyester price ratio decreased 13 per cent, from around 3.8:1 to 3.3:1. In contrast, the ratio of the price of 21 micron wool to the Cotlook ‘A’ index has been trending upward since July 2008, as cotton prices have fallen relatively more than wool prices. Between July and November the estimated wool to Cotlook ‘A’ index increased by 20 per cent, from 5:1 to 6.1:1. However, given the forecast of a recovery in world cotton prices to the end of the season – an increase that is expected to be stronger than that for wool – wool’s competitiveness relative to cotton is expected to improve later in the financial year. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||