|U.S. Wool Season Begins Strong this Spring
(April 1, 2012) The U.S. wool season began in February with about 222,000 lbs. trading, of which about 30 percent reported on a clean basis. In the Territory States, clean wool averaged 30-percent higher than a year ago. At the beginning of February, 22 micron averaged $4.39 per lb. clean, 25 micron was $3.43 per lb. and 26 micron was $2.63 per lb. At the end of February, 24 micron was $4.67 per lb. clean. On a greasy basis, wool ranged from about $1.26 per lb. for 21-22 micron to $0.91 per lb. for 25-26 per lb.
The Australian Eastern Market Indicator (EMI) was Australia (AU) $1,221 per kg (U.S. $5.57 per lb.) clean in February, up 2 percent monthly and down 3 percent from a year ago. From late 2010 to mid-2011, Australian wool prices propelled upward, setting records. For the last eight months, however, prices stayed historically strong yet softened marginally from its record high and have been very volatile. In spite of the recent appreciation of the Australian dollar, wool market sales remained strong with continued presence by the Chinese and Italians.
Australian wool prices, international cotton prices and U.S. wool production explain 96 percent of the volatility in U.S. wool prices. Australian wool prices and cotton prices are statistically significant in explaining U.S. wool prices. This is important because it helps us forecast U.S. wool price trends. It was surprising that U.S. Gross National Product (GNP) wasn’t significant and perhaps further research is needed. While China is the largest raw-wool importer, the United States is the largest wool apparel consumer and U.S. macroeconomic indicators should help predict U.S. wool prices.
Australian prices thus are a good indicator of where the U.S. market is headed. Actual U.S. values might vary depending on current market conditions, yield, strength, length, colored fiber content, poly contamination and other quality factors.
Although wool demand can be fickle and reduce wool sales, the overriding consensus is the continued tight supplies will drive prices this season. The Wool Economic Focus by Landmark reported that world consumption of wool is predicted to decline by 2 percent in 2012. It continued, “While demand for wool has been affected by the concerns about the global economy in 2012 and higher wool prices, a bigger influence is a lack of supply and availability,” (2/2012). World wool production is growing, albeit slowly. The Australian Wool Production Forecasting Committee forecasted in December 2011 that this season could see a 1.5-percent gain over 2010/2011 wool production.
Australian Wool Innovation’s (AWI) Market Intelligence reported that perhaps improved sales data in the United States is the best indicator of encouraging news for the wool industry. It reported that the United States is the largest apparel wool and clothing market, around $1 of every $4 of consumer investment on clothing and footwear occurs in the United States and it’s the destination for around 20 percent of Chinese clothing exports.
For this reason, we pay close attention to the U.S. retail situation, which has been stagnant since the global financial crisis. Marginal gains in the labor market and income gain has stirred consumer confidence. Recent figures from the U.S. Commerce Department show January sales were 5.3-percent higher year-on-year, and sales at department stores were 1-percent higher than December and 1.5 percent up on last January, (AWI Market Intelligence, 2/2012).