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Wool price looking better

AFTER spending 2003 slowly ebbing away, the wool price opened this year with signs of faint growth

The average price for the 03-04 season looks like being about 889 cents a kilo. In the previous season it was 1,160 cents a kilo.

However, the national market indicator jumped 36 cents to close on 827 cents a kilo clean this week.

Most of the gains were made for fine wools.

Indeed, a recent sale in Victoria was the highest ever for fine wool – 180,000 cents a kilo clean for 12.2 microns.

The bale went to Korean buyers.

In the latest sale in Western Australia, there were gains in the order of 6 cents a kilo for 21 microns and 34 cents a kilo for 19 microns.

However, those gains are after a four week lull and there is some pent up demand reflected in those prices.

The price gains come at a time when farmers are sitting down to decide what they will turn their farms to for the coming year.

Wool, at the moment, presents a bit of a quandry for them.

The outlook for sheep meat is looking strong into the medium term and grain yields, even with the stronger Australian dollar, are promising.

There is also a strong push from beef, especially with increased demand expected to come from Japan in the wake of the Bovine Spongiform Encephalitis scare out of the US.

Even with the live sheep export trade looking shaky, there are still high prices being reached in the chilled meat export market.

Some farmers have been putting meat sheep with their wool ewes to produce meat lambs to cash in on the high meat prices.

While farmers are still able to reap the wool from their ewes, they are not increasing the size of their wool sheep flocks.

The Australian wool clip has dropped considerably in the past few years. It is now down to about 450 million kilos – about half of what it was at its peak.

There are also concerns about the viability of the fine wool market.

The difference in price between fine wool – usually below 19 microns – and the next grade of wool is only about 90 cents.

Traditionally the finer wool has attracted a premium of more than 500 cents.

However, there is little expectation of top makers and the like buying more finer wool because there is no guarantee that the price difference will remain so low.

If they commit to the finer wool, they could be caught short by a price increase and there is very little price flexibility from their customers.

WAFarmers wool section president Dale Park said farmers were facing a difficult decision about what to grow this year.

"The wool price has been down for about a year now and while there have been some increases, it is hard for a farmer to justify increased wool production based on just two weeks worth of price rises," he said.

Mr Park said farmers faced a lot of options with sheep meat, grain and even beef prices looking tempting.

Pastoralists and Graziers Association president Barry Court said the price rises in the past two weeks had been encouraging, given the poor year wool growers had experienced.

However, Mr Court admitted that farmers were more likely to turn to meat production this year.

BankWest agribusiness market analyst Dan Fels said Europe and China were the main markets for WA wool.

He said the US dollar price was not causing as many problems for wool growers as people believed.

"A weak US dollar is not always a bad thing," he said.

 

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