AWI calculations short
AUSTRALIAN Wool Innovation has been caught short with its calculation of this season’s wool prices.
In its annual report last week, the research and marketing body said it based its income forecasts on an average Eastern Market Indicator of 1650c/kg in
2018-19, significantly shy of the 1900c/kg forecast by ABARES and 1850c/kg quoted by AWI to a meeting of wool growers this month.
It also differs from the
1700c/kg average projected in WoolPoll voting information sent out to growers in September and is 20 per cent down on current market trending.
For the first 14 weeks of
2018-19 selling season, the EMI has averaged 2025c/kg and for it to meet AWI’s
1650c/kg it would need to average 1480c/kg for the remaining 31 weeks.
Some growers say that to reach 1650c/kg the indicator would have to dip below
1100c/kg — to prices similar to those achieved in 2015.
But an AWI spokeswoman said discussions for the
2018-19 budget took place in April this year.
She said AWI regularly reviewed the budget based on the EMI “however this doesn’t mean the organisation is banking on this forecast”.
“Prices have been particularly volatile in recent years.
“Whilst it is clearly not that easy to explain or predict why markets of any product react in the way they do, on the surface the current wool market behaviour seems to be going against the most logical of thinking,” the spokeswoman said.
“Supply is forecast to be in serious decline and demand for wool products, in particular Merino, at retail and consumer level remains strong, yet the market has taken this downturn.”
In March, when the EMI was at more than 1800c/kg, AWI chief executive Stuart McCullough described the wool market as “a boom, all right” and said he didn’t see “any reason it would slow down soon”.
The EMI last week finished at 1874c/kg — down 96c/kg in a week and almost
250c/kg shy of the record
2116c/kg achieved in mid-August.
National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said there was currently some negative sentiment from Chinese woollen mills amid concerns about a flagging domestic economy and retail sales, which was having a “knock-on effect” on Australian wool prices.
Sydney’s 17-micron indicator took the biggest price hit last week, losing 161c/kg, while Melbourne’s benchmark 19-micron indicator shed 83c/kg.
MISSING THE MARK: AWI has been caught short with its calculation of this season’s wool prices.