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Wool Prices Sheared by Weak Demand

Wool prices are feeling the fickle fate of demand.

In Australia this week, the Eastern Market Indicator was down 42 cents to $15.72 per kilogram clean from the sale a week ago. A total of 37,598 bales were offered with sales of 86 percent, according to the U.S. Department of Agriculture’s weekly report issued August 26.

The USDA report put Australian wool at $5.26 a pound clean delivered to the U.S., with average prices down 20 cents a pound from the previous sale.

Australian Wool Innovation said following two weeks of consecutive rises and seeing the benchmark Eastern Market Indicator go into record territory, the market hit a price point where it hurt demand and the market reacted accordingly. In addition, more than 18 percent of the Melbourne merino fleece and 12 percent of the Sydney merino fleece failed to reach growers expectations.

“Given the prices being offered were just off a record high level, this was a paradoxical figure to most exporter buyers, but perhaps it was more to do with the speed of the market adjustment rather the actual price level that caused such high passed in rates,” the Australian Wool Innovation said in its Wool Market weekly report for the sales week ended August 24.

Prior to last week, the EMI prices was up 28 percent year-over-year in U.S. dollar terms.

AWI said large orders from China in the previous week seemed to dry up overnight at the start of last week. Buyers approached the sales with extreme caution, and as soon as weakness became the trend, most buyers retreated steadily to levels that were more reflective of where the buying demand has appeared the previous week. Those locally based exporters that had written forward orders also withdrew, and bought sparingly, waiting to achieve price levels that were more representative of where they had sold.

[Read more about wool fashion: Woolmark Teams With Lane Crawford for Merino Wool Athleisure]

However, strong buying from Italy ensured a different market direction on the spinners. Few bales were allowed to go to their competition and this led to a slight escalation in prices, bucking the trend of all other wool sectors.

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In contrast, spot cotton prices averaged 67.01 cents per pound for the week ended Aug. 24. The weekly average was up from 65.91 last week, but down from 66.19 cents reported the corresponding period a year ago.

Meanwhile, global synthetic fiber prices rose 7.3% in July, according to the most recent data from PCI Research. It represents the continuation of a months-long trend during which the overall price index has sustained high-single-digit increases, primarily due to significant increases in Asian prices.