THE HIGH Australian dollar has had a major impact on wool prices in the past six months, according to Woolmark Market Intelligence market economist Paul Deane.
"Currency will always have an impact," Mr Deane said.
"I can't make a prediction but certainly if we continue to see the Australian dollar strengthen then that would be a negative for wool prices."
But Mr Deane said if the $AUS "comes back", to about US85 cents, then prices would rise.
Wool prices "peaked" in January 2008, after rising solidly for the past two years.
"The Eastern Market Indicator peaked at over 1000 cents a kilogram clean, about 1040c/kg from memory, and we're back to 874c/kg this week (Friday July 4)," Mr Deane said.
"So you're looking at a decline there for prices at 20 per cent for the past five to six months."
Inputs slash returns
Tom Willson (pictured), New Country KI, Dudley Peninsula, Kangaroo Island, says wool prices need to stay at "around" $1000 a bale or mor because of higher input costs.
"It is costing more and more for petrol and chemicals and we need prices to stay at this level or even above otherwise we're paying out a lot of money for little return," he said.
Tom says wool prices for the next 12-months will change depending on what the Australian dollar does. And he believes heating costs may increase world demand for wool.
"The cost of gas and heating in the Northern Hemisphere and around the world may mean that wool might become an item, like it was in the 1950s when people wanted wool trenchcoats, because it will be cheaper to throw on a wool jumper or coat to keep warm," he said.
Tom runs 4200 Merinos on his KI farm and has an average flock micron of 20.5. His wool cut per hectare in 2006 was 74 kilograms/ha, on average his sheep cut about 7kg of wool per head.