Spend Matters welcomes this guest post from Verity Michie, of Mintec.
Many people’s favourite season is winter. However, winter this year has been particularly cruel in certain regions of the U.S. The East Coast suffered a massive snow storm, and Texas lost tens of thousands of dairy cattle in winter storms.
But one thing that can’t be argued is that when it’s cold, we like to wrap up to stay warm and cozy in natural fibres like wool. Unfortunately for wool lovers, the last 12 months have seen Australian prices increase by some 19%.
Wool is a great fiber, as it absorbs moisture and keeps a layer of insulation next to the skin. Well-maintained wool is an extremely durable fibre. Around 80% of wool is used for clothing, with the remainder going into production of carpets, blankets and upholstery.
Although the U.S. produces its own wool, it does rely on a number a number of trading partners, Australia being the major one. Australia is the world’s largest producer and the second largest global exporter of wool (50% of U.S. Imports).
At the beginning of 2015, the Australian dollar (AUD) depreciated against the U.S. dollar, making the price of Australian products more attractive. Many wool buyers took advantage of this and the resulting increase in demand helped to strengthen prices. A second contributing factor that affected the market price was supply. In 2014, wool production reduced due to Australian weather conditions, an extended dry period lowered the birth rate of lambs and the corresponding wool production.
As the dry weather conditions continue in Australia, wool production may again reduce in 2016. Future price increase may be on the horizon.