Wool market suits healthier 2022 prices but cotton could unravel outlook

Workers around the world sharpening up their wardrobes as they cease remote working are expected to be a big driver for Australia's woolgrowers' earnings, according to one agricultural analyst.

Rabobank's Dennis Voznesenski told Flow listeners on Wednesday the agribusiness banking specialists were projecting a 7 per cent price rise this year:

“We’re forecasting the Eastern Market Indicator’s rise of 7 per cent on average this year versus the 2021 average and in terms of value that’s between 1350-1500 cents per kilo.”

“The biggest driver from my side is recovering demand for woollen suit imports and if you look at, taking as an example, the US – you’re seeing woollen suit imports only 26 per cent below pre-pandemic levels towards the end of last year, compared to earlier in the year when it was 80 per cent below pre-pandemic levels.”

“If you take France as an example for what’s happening in Europe - that actually reached on par with pre-pandemic levels at the end of last year, that’s not to say its all happy days and there’s no issues at all, if you look at consumer confidence and the world’s two largest markets, the US and China, they’re starting to decline and one of the biggest issues would be rising interest rates.”

Hear the full interview with Rabobank's Dennis Voznesenski on the FlowNews24 podcast:

Voznesenski said in stark contrast to wool prices that the cost of cotton was expected to decline.

“The other factor to consider is that cotton prices have been really strong and that’s supported wool prices over the last year.”

“But, cotton prices are actually expected to decline over this year as the new supply comes online.”

Voznesenski warned that rising cotton production could dent late 2022 wool market prospects:

“Important to keep in mind, as we move through the year, those cotton prices are going to start weighing on wool because, as more production comes online around the world, there’s going to be more cotton around and that might weigh on wool as we move to the end of the year.”