Slipping production of wool in Australia and increasing demand for the soft fiber in Europe will stress the commodity's short supply, according to a South African industry group.
The general manager of Cape Wools in Port Elizabeth told Bloomberg that a global shortage of cotton is straining the markets and pushing prices higher. South Africa is the globe's second-largest producer of wool.
"There is a significant worry developing among users of wool that there will be a shortage of supply," Andre Strydom told the news service last week.
Persistent drought and flooding in Queensland, the Northeast Australia state, has pushed down wool production, he said.
The Australian Wool Production Forecasting Committee said this season's wool output might total 335 million kilograms (738.5 million pounds), which not only is below the December 10 estimate of 340 million kilograms (almost 750 million pounds) but also markedly less than the 475 million kilograms (nearly 1.05 billion pounds) produced during the 2004-5 season.
"It will take about two to four years before we see an appreciable increase in Australia's wool production," Strydom said. "Rebuilding stocks in Australia will lead to an increase, but nowhere near the production levels seen a decade ago."
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.