Australian Wool Prices Plunge as Credit Crisis Trims Demand

By Madelene Pearson

Oct. 23 (Bloomberg) -- Wool prices in Australia, the world's top producer and exporter of the fiber, had their biggest weekly fall in five years as the global credit crisis trimmed demand.

The benchmark Eastern Market Indicator fell 7 cents to A$7.64 ($5.08) a kilogram today, a two-year low, David Cother, wool services manager with the Australian Wool Exchange said. Prices have plunged 8.9 percent this week, the biggest weekly drop since the 11.4 percent fall in the week ended May 2, 2003.

``We are in unfamiliar territory with global commodity markets and credit markets,'' said Maurie McNeill, northern region wool sales manager with Adelaide-based Futuris Corp.'s Elders unit, the world's largest wool broker. ``Credit is a lot harder to get and the wool industry revolves around credit.''

Commodity prices slid to a four-year low yesterday on increased concern a global economic slowdown will reduce demand for raw materials. China, the biggest buyer of Australian wool, grew at the weakest pace in five years in the third quarter.

``It appears that China has put buying on hold as a reaction to the credit crunch, and is utilizing some of the wool that is in the pipeline,'' Kim Henderson, senior vice president, Western Australian Farmers Federation wool section, said in an e-mailed statement. ``The fall in wool prices this week is simply an overreaction to the world economic crisis, with a correction highly possible in the near future.''

There are no wool auctions in Australia tomorrow.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net