Wool Economic Focus
March 9, 2012

World fiber consumption is facing considerable uncertainty in 2012 due to the twin effects of the predicted slowdown in the world economy and a reaction to the high fiber prices in 2011. As a result, total fiber consumption will barely grow in 2012. In contrast, world fiber production is expected to grow strongly in 2012 due to a strong increase in world cotton production. The combination of weak fiber consumption and an increase in production will keep pressure on world fiber prices. 
 
World fiber prices have pulled back from the peaks seen in 2011. The most significant decline has been in world cotton prices. Since the peak in March-April 2011, cotton prices have declined by 56 percent, while prices for polyester staple and for acrylic have declined by 17 percent and 22 percent, respectively. This decline reflects the weak consumption growth while production and supply has increased. 
 
Wool prices have mostly performed better, mainly due to the supply squeeze. Medium (21 micron) wool prices have fallen by 9 percent since the peak in June 2011 with crossbred (28 micron) wool prices also falling by 9 percent. The exception to this performance are prices for superfine (18 micron) wool, which have fallen by 24 percent. Unlike other wool types that are in tight supply, the superfine wool production has increased in 2011-2012, putting pressure on prices. 
 
Wool prices could be sustained at around current levels given the tight supply while prices for other fibers could weaken a little in 2012. 
 
Reprinted in part from Landmark, AU