The latest edition of its quarterly Australian Commodities report, ABARE, the Australian Government forecaster has forecast a stronger outlook for most commodities, resulting in a 1.7 percent increase in the gross value of farm production in 2005/06.

It had tipped a 2.3 percent decline three months earlier. Despite these trends, ABARE predicts that wool exports and prices will continue their depressed price and demand levels.

ABARE now expects wool prices to average 670 cents per kg clean, the lowest level since 1999/00 when prices were affected by the Asian currency crisis coupled with high stock levels.

The new forecast for 2005/06 compares with the 746 cents average recorded in 2004/05.

Given the close link between the EMI levels in A$ terms and the A$/US$ exchange rate over the past two years, ABARE's forecast for the A$/US$ exchange rate is important to their forecasts for wool prices.

The forecaster has assumed that the A$ will average 74USc over the 2005/06 season, 1USc lower than the previous season.

Given that the A$ has averaged 75.63 US cents for the period 1st July to 16th December 2005, ABARE appears to expect the A$ to weaken slightly over the remainder of the 2005/06 season.

ABARE predicts that as prices for all micron categories continue to ease, producers are expected to continue to focus efforts, where possible, on a mixed enterprise business model that includes the production of prime lambs.
 
Australian Wool Innovation Limited 
 
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