About half of Australian wool is exported to Asia and after the crisis, the wool prices took a tumble. The Eastern Market Indicator (EMI) for wool is reportedly getting closer to 600 cents per kg whereas any price below 700 cents is considered unprofitable for most of the woolgrowers. This is pushing many of them out of wool growing and Australia's wool production is expected to be lowest over the last two decades.

Although Australian wool industry is passing through a crisis, it still remains the biggest rural commodity earner. According to observers, the current year may see a $4.2 billion earnings from this sector but it is most likely that top woolgrowers will make a profit.

Among the measures suggested to salvage the situation is the removal of trade barriers and quotas thatrestrict wool exports in overseas market. But with this, Australia too will have to remove tariffs on finished woollen products imports. On production side, the growers are improving productivity through keen participation in research and extension but their incomes depend on the commodity prices on which they have little control. But to counter this problem, the woolgrowers are forming cooperatives to secure premium prices for their wool and to gain access to markets.

According to a consultant Hassall & Associates which undertook the study of group selling arrangements in Australian wool industry, wool cooperative selling arrangements are emerging across Australia in response to the deregulated marketing arrangements facing the Australian wool industry in the 90's.

During the first quarter of 1998, Australia's wool exports were lower by 14 per cent. The downturn in East Asia accelerated as a result of ongoing financial turmoil in the region, restructuring in Korea and deteriorating economic conditions inJapan. Demand from Hong Kong and China too weakened. After one and half year of solid growth, Australia's wool exports to Western Europe have started to turn down. Top production appears to be slowing due to weaker orders and high yarn stocks. Australian wool industry also faces a threat of increased competition from cheaper Asian wool textile suppliers mainly yarn. A silver line is that Australia's wool exports to North America, Eastern Europe, India, Turkey, Egypt and Iran rose strongly in this quarter by over 35 per cent.