[purepearls]

As reported by Jewellery Net Asia:

4/12/05

Production in 2005

Australia's South Sea pearl production is expected to remain stable or decrease slightly in 2005 as some producers reduced the number of oysters they seeded a few years ago in response to the weaker market situation.
Chief executive officer of the largest producer in Australia, Paspaley Pearls Pty Ltd, John Kelly, said he expects production to remain stable in 2005. "The
production situation in 2005 represents decisions made by producers a few years ago based on the market situation. In addition the quota on hatchery shells that can be seeded in the first operation has been static for the past two years and growth will only be through second and third operations."

Mr Kelly said Paspaley's production is relatively steady and the company expects small amounts of growth. Our focus continues to be on quality production. Producers said the farming situation is generally stable but some smaller producers are finding it tough and are considering leaving the business. Reports indicate that a smaller producer in the Northern Territories is in the process of selling its farm and shell quota to another producer also in the NT.

In addition to the overall market situation, Australian producers have been struggling with slim business margins because of the strength of the Australian dollar against all other major currencies, particularly the United States dollar. Mr Kelly said the outlook for 2005 is less optimistic because of the high exchange rates. "With exchange rates the way they are I think everyone will have their heads down trying to make ends meet. With the yen at 80 to the Australian dollar and a United States dollar at 78 cents to the Australian dollar the business has become marginal even for the best operators."

Overall prices of South Sea pearls are stable and rising on international markets. Although the average export price of a pearl in 2004 decreased according to the statistics, producers said, prices of most
categories have been increasing.

Mr Kelly said he believes commercial goods will continue to increase in price as much of the market has been focused on this sector for the past two to
three years. "The opportunity for growth is to build a business in cleaner, better quality goods that are affordable at today's prices."

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