THE wool buyers are back, helping to take some of the pressure off Australia's 60,000 wool producers. After the first week of the New Year, foreign buyers snapped up 69 percent of the wool offered for sale. Last week - the second week of the season - the war in the Gulf caused buyers to pull back and purchase only 55.5 percent of the wool auctioned. However, this is an improvement over late last year when 80 percent of the wool was bought by the Australian Wool Corporation (AWC), a government-guaranteed organization that markets all of Australia's wool and is the buyer of last resort.
Importantly, the average price paid by the foreign buyers is slightly higher than the floor price of $7 (Australian; US$5.44) per kilo set by the AWC for clean wool.
Even though many of the Japanese and European buyers had returned, officials are cautious. ``It's encouraging but still too early to make any comments,'' says a senior aide to John Kerin, the minister for Primary Industries and Energy in Canberra.
It is difficult to know exactly how much world demand for wool has picked up. The AWC has reduced the amount of wool offered for sale by 30,000 bales per week to 140,000 bales per week. In addition, the markets were closed through Christmas and New Year. Thus, there is some pent-up demand.
AWC officials were also handed a setback last week when a delegation of buyers from the Soviet company, Novoexport, canceled their visit. The Soviets said budget problems would prevent them from buying any wool.
This is a surprise, since the Soviets recently paid $66 million (US) owed to Australia for wool bought and delivered last year. However, the Soviets still owe $57 million (US) for wool bought and stored in Australia but not shipped.
Despite the better tone to the market, Vincent Matthews, a spokesman for the AWC, says ``We still have this problem of overproduction.'' The AWC estimates Australian farmers will need to destroy 15 to 20 million sheep to bring supply into line with demand. This flock reduction is already in progress. The AWC has also increased its levy on wool producers and has set a quota of 75 percent of last year's flock size. The AWC now has warehouses stuffed with 4.6 million bales of wool.