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Wool vs other commodities - Australian Wool Innovation

Feb '07
Australian Wool Innovation (AWI) says that while raw resource materials, such as metals, oil and gold, as well as semi-processed products such as steel saw prices pull back moderately towards the end of 2006, they remained well above levels recorded in the previous year.

Robust demand from China, India and other developing Asian economies supported the price boom of these commodities, as these regions continue to expand their manufacturing bases to supply the global retail markets with manufactured goods.

The emergence of China, India and other key developing Asian countries over the last few years has brought with it a fundamental change to the global economy. With a seemingly unlimited supply of cheap labour in these countries, raw materials are now relatively scarcer than labour and capital to make the manufactured goods.

The impact of this change in the global economy has also been seen to some extent, in the prices for fibres, including cotton, acrylic, polyester, supply-constrained luxury fibres, such as mohair, cashmere and alpaca, and finally, wool.

The gains for these commodities has been muted compared with metal prices and it is generally accepted that lower levels of price growth for agricultural products compared with metals is due to the more flexible supply and the low income elasticity of demand for agricultural products.

While wool prices have risen they are still somewhat counter-cyclical to other commodities, as prices for some metals and oil began to drop on the high levels seen in 2006.

Australian Wool Innovation Ltd

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