Wool, a laggard in the farm commodities rally, is to continue trying to make up for lost time, with prices to remain "elevated" thanks to a scramble between clothing and meat groups for constrained sheep supplies.
While wool took until October to join the surge in farm commodity prices, it has been a solid performer since, with prices in Australia, the top exporter, rising by one-third to top Aus$12.00 a kilogramme, the highest for at least five years.
"Wool prices have caught up and generally overtaken the broader agricultural complex," National Australia Bank said.
And they are to "remain strong" this year, supported not just by the jump in prices of other fibres, notably cotton, but also by heightened competition within the ovine sector.
Cotton prices rose the exchange limit in both New York and on the Zhengzhou exchange in China, the top producer, importer and consumer of the fibre,
Flocks to decline
Wool supplies have already been dented by a decline in world sheep numbers, with flocks in both Australia and, especially, New Zealand hurt by poor weather.
Official data show New Zealand lamb numbers are down 10% on last season, after September storms caused significant ewe and lamb casualties.
And hopes of a rapid rebuild in sheep numbers are being held back by strong demand for lamb and mutton which has been whetted, like that for other meats, by global economic recovery.
"The decline in the global sheep flock is set to continue for at least another year," NAB agribusiness economist Michael Creed said.
"This should maintain pressure on both meat and wool prices. Wool prices will need to remain high in order to compete with sheep meat."
Disease impact
Competition for Australian supplies has been further heightened by setbacks in other exporting countries, with Uruguay suffering a production downgrade, while South African trade has been hampered by an outbreak of rift valley fever.
China, which typically buys 70% of Australia's wool exports, looks set to increase its purchases further after blacklisting South African supplies.
"The return of Italian buyers has provided further demand side pressure," Mr Creed said.
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