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Wool drop an economic overreaction, WAFarmers

10
Nov '08

The Western Australian Farmers Federation (Inc) (WAFarmers) Wool Section Senior Vice President, Kim Henderson, believes the fall in wool prices is simply an overreaction to the world economic crisis, with a correction highly possible in the near future.

“It appears that China has put buying on hold as a reaction to the credit crunch, and utilising some of the wool that is in the pipeline,” said Mr Henderson.

“Additionally, the US purchase around 18 months ahead in terms of wool sale-to-retail, so the 2010 winter acquisitions program is just about done. This, combined with US consumer confidence slumping, is stopping US demand in its tracks.”

Mr Henderson commented that economies are being stimulated throughout the world with the aim of reaching some stability.

“As this occurs, it is likely oil prices will slowly increase, driving synthetics prices higher again.”

“This combined with falling sheep numbers and thus wool supply in Australia, and some adjustment from China as they resume somewhat normal trading conditions, should see wool prices stabilise and rise.”

“The recent events highlight that there are many factors affecting world economies and that close attention of market trends are needed.”

Mr Henderson recently attended a marketing update session with Australia Wool Innovation (AWI) in Sydney, where a new wool brand was launched. The launch is planned to increase demand for Australian wool by 20 million kilograms per year.

“AWI's new marketing program seems very well designed and innovative and it's essential that the wool industry capitalises on this launch with a focus on comfort factor and quality control from the farm right through to fashion houses.”

“Failure to do so may result in demand for wool falling further,” concluded Mr Henderson.

The Western Australian Farmers Federation

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