Wool is a type of fur that forms the coat of a sheep. It has enjoyed popularity as a textile for most of the recorded history of mankind, its adaption for human use occurring concurrently with the domestication of livestock some 9000 years ago. Wool has several appealing features that make it ideal as a textile, such as the fact that it is warm and thick, while also being durable and flame resistant. On top of this, wool is renowned for its ability to absorb and retain moisture, drawing water away from the wearer’s skin while not losing insulation due to the added moisture it absorbs. The warmth that wool clothing provides is due to the fact that wool is an extremely poor conductor of heat, owing to the fact that small air pockets form between the elasticated fibres that make up its form. It is also easily treated with dye, which again has made it appealing as a textile for thousands of years.
Wool as a commodity is traded on a number of commodity exchanges, including the Australian Wool Exchange (AWEX) and the Australian Securities Exchange (ASX). Various types of wool are traded in the wool market, such as fine wool and broad wool, the names relating to the type of fibres present in the wool. Wool yarn futures are also available, as are futures in greasy wool, which is the name given to wool that has not been processed in any way, as opposed to other kinds which have been cleaned.
The main special feature of wool as one of the world’s foremost agricultural commodities is that the material does possess a number of features which other fibres do not, as described above. It is also a completely natural fibre, which would see it gain preference in a number of markets. The fact that sheep are only sheared once a year to produce the wool means that the market trends, in terms of supply at least, are predictable to a degree that could be exploited by shrewd traders in wool futures.
The main market for wool trading is the textile industry. Wool is still used for clothing, although the demand for wool has dropped off with the advent of synthetic fibres that are cheaper and more easily produced. Wool does still enjoy popularity, however, as an insulator for houses, and for use in carpeting and other kinds of soft furnishing. It is still employed as the filler for certain kinds of mattresses also.
Australia and New Zealand are the leading producers of wool worldwide, and any wool price will most likely be dependent on the amount of wool exported by these two countries (most wool that is produced is a product of a specific breed, the Merino sheep).
The prices of wool futures, and the state of wool trading in general, can be affected by a number of factors. The wool trade can be affected, for example, by the price of the food used to feed the sheep that produce the wool. Increasing grain prices can make the cost of raising some types of sheep prohibitively high, which will negatively impact upon the price of wool futures. The wool price may also be affected by the advent of more synthetic fibres which possess similar properties to wool yet which can be produced for less money. This will also negatively impact upon the wool market, decreasing demand and lowering wool prices.
Ready to Start Trading Wool Commodities?
We recommend Plus500, who offer…
- Up to 1:50 leverage
- £20 free credit
- Smooth web-based, Windows, iPad & iPhone trading