By and  on December 26, 2006

The world's textile producers have seen a steady increase in fiber prices during 2006, primarily because of increased energy costs, a trend that is likely to continue in the new year.

Wool has experienced some of the biggest price gains among natural and synthetic fibers. The average price of a pound of wool reached $3 last week, after ending 2005 at $2.13 a pound, according to the Woolmark Co.

Stuart McCullough, a product commercialization manager with Australian Wool Innovation, attributed the rise to a combination of a prolonged Australian drought and an increase in demand.

"There's a drought down there that they're saying is the worst on record," said McCullough, who is based in New York. "It's very bad and given that our seasons are the opposite of here, they had a winter with very little rain and they've now gone into summer when it doesn't rain."

McCullough returned from a trip to Australia last week and said the situation was the worst he had seen. Typically, Australian sheep farmers don't need to purchase supplemental food for the animals until February or March. However, farmers have already found it necessary to begin buying feed.

"If they can't feed or water the sheep, they can either sell the sheep for meat or they have to shoot them," McCullough said.

The demand for wool has increased among retailers and consumers. Retailers have gravitated to wool as a way to better their margins, while consumers have been drawn to less disposable and higher-quality products, McCullough said. The rising popularity of cashmere in recent years has benefited wool, as well, he added, pointing out that the fibers are similar.

"We're seeing pressures from both the supply and demand side," McCullough said. "You only need one to see price go up....There's no doubt the price will be higher in 2007."

Cotton prices have been fairly stable in the past year, dipping slightly to 51.99 cents a pound from 53.49 cents a year ago. Cotton Inc.'s December Economic Letter noted that the U.S. Department of Agriculture's monthly report points to looser markets for cotton domestically and worldwide. In the U.S., with 90 percent of the crop harvested, production estimates are unchanged from last month at 21.3 million bales.

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