Brightening prospects for wool and cotton

WHILE much of the focus in recent years has centred on strengthening demand for food commodities, much less has been said about the fibres that have an equally positive story to tell. According to the Westpac-NFF Commodity Index global prices for cotton and wool during the last six months have escalated by 4.9% and 18% respectively, despite the significant appreciation of the Australian dollar.
Brent Finlay is a superfine wool grower from Dalveen in Southern Queensland, and notes that while the recent price increases have not been uniform across all wool grades, it is still encouraging to see wool producer returns in a much better state than at the same time last year.
“With the global economy now showing signs of recovery and Chinese growth continuing to outstrip the world, the prospects for wool are looking increasingly positive. We believe that wool production, complimented by spin off benefits of sheep meat production, is an attractive enterprise that stacks up well against alternative agricultural production systems.”
Central Queensland cotton producer, Hamish Millar, is also positive about the fact that fibre prices have managed to buck the recent downward trend being seen in global grain markets. “There is no doubt that cotton supplies, particularly in the United States, eased during the soft commodity boom of 2007-08 as producers substituted cotton crops with grain and corn,” said Hamish.
“Although we have seen a shift back to cotton production in recent times, world prices have held up pretty well. Natural, cool and renewable fibres such as cotton are clearly still offering a good value proposition to the global consumer.”
Despite the positives, both Hamish and Brent realise that significant challenges remain for the Australian fibre sector, and understand that the continued health of the Chinese manufacturing sector and combating the strong competition of synthetics will be ongoing challenges for natural fibres.
“Few Australian industries can claim to be as highly dependent on the global marketplace as the wool and cotton sectors – both exporting well in excess of 90% of their production,” said Westpac Senior Agribusiness Economist Andrew Hanlan. “Both sectors have seen prices increase, even at a time when the Aussie has jumped 26% against the Greenback in the last six months, suggesting market fundamentals are strong for Australian fibre.”
During October 2009, the Westpac-NFF Commodity Index increased by 2.5%. The Index is now 16.2% lower than a year ago. Commodity prices that lifted during October included wool (4.6%), cotton (3.0%), wheat (3.3%), barley (12.5%), dairy (7.6%), and beef (0.3%). International commodity prices easing during the month were canola (-4.6%) and sugar (-6.5%).
[ENDS] The Westpac-NFF Commodity Index is weighted according to the value of Australian agricultural exports and includes only rural commodities – unlike other price indices that are overshadowed by oil, mineral and energy prices. It provides daily movements based on prices of Australia’s eight key farm exports – barley, beef, canola, cotton, dairy, sugar, wheat and wool – in both $US and $A.