Prices Surge for Australian Wool
January 20, 2017

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, hit 1439 cents per kilo this week, 3 cents above the previous record set in June 2011.

In U.S. dollar terms, the EMI is up 20.5 percent from this time last year - 895 to 1079, respectively. Also, the Australian dollar is 8.9 percent stronger year-on-year.

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," Morgan said. "The current price is the equivalent of $14,390 per tonne, making wool Australia's highest unit value agricultural commodity."

The steady gain of the EMI has been largely driven by demand for top-end superfine lines, which have risen by 30 percent - $4.50 - in 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 percent in the past six months.

China is the biggest buyer of wool, purchasing around 75 percent of the clip. The Chinese expansion has more than filled the void of Italian buyers, who fell from around a 20 percent market share to less than 5 percent, 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 percent of Australia's wool.

Source: ABC Rural