Wool market hits four-year high

WOOL prices have hit a four-year high after strong demand pushed the eastern market indicator (EMI) to 1008 cents a kilogram at the close of last week.Market analyst Malcolm Bartholomeaus of Callum Downs Commodity News said the only other time the EMI had reached this level was in the 2002-2003 supply driven price spike.But when compared in US dollar terms, he said, the market was much higher now."In January 10 2003, the market peaked at an EMI of 1212c/kg û which equated to an EMI of 700US cents a kilogram. This week at 1008c/kg, in US dollar terms it equates to 138 cents a kilogram higher than the peak back in 2003," Mr Bartholomeaus said.The extended run of high prices has the market situated in a never before seen position.Wool of 18 micron and less posted the strongest gains, with bales selling for $100 dearer on average.According to cyclical trends, Mr Bartholmeaus expects the market will begin to show some resistance to the current high prices, but he warned a speculative buying market wanting to cover future commitments was difficult to forecast."When a market is almost exclusively driven by a high degree of uncertainty - for what ever reason - then it becomes unpredictable. "It could go much higher, but not for long, and if it does it could become very damaging", he said.The rise in prices last week has been driven by strong immediate demand to secure wool to fill orders that are already out, with China and Europe active in the market place.Despite anticipating an outlook of weakened prices, Mr Bartholmeaus said supply would not impact on the market to the extent it did in 2003."The amount of wool available in the April-June selling period is looking like it will be 60 per cent higher than the same period in 2003 when record prices were had," he said.It is for this reason that he is certain demand is running much stronger than other years, and supply is not unrealistically tight like it was in 2003.Despite high prices bringing relief to producers, Mr Bartholomeaus said BWK Elders was already reporting that yarn prices were not rising along with raw wool prices and if this trend continued there was a danger high prices would flow through to consumers and a demand choke could happen.With forward markets not following the physical market prices, the market was sending a clear signal that there was an immediate need for wool and producers should not be storing wool.