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Weekly Market Report

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With Mark Dyson, Managing Director

February 10, 2012

Low mill stocks forces market rally

PRESSURE on woollen mills to replenish their stocks contributed to a strong market rally this week.

Many processors have reduced their stock levels in light of the expected tougher retail trading conditions and they now find themselves in a “have to buy’’ situation, which, in the face of the low supply, is forcing the market up.

It is anticipated these market levels will remain firm for the foreseeable future, with buying activity in forward markets now at similar levels.

Good price gains were recorded across the board this week, with superfine wools hogging the limelight.

The demand for finer types is predominately based on the premise that they are cheap relative to the rest of the market. They are actually about 25 per cent cheaper than at the beginning of the season, whilst medium wools are almost on par.

The Eastern Market Indicator jumped 50 cents per kilogram to close at 1243c/kg clean. It was up 59c/kg in US terms to 1340c/kg US.

Most fleece wools fetched an extra 50-80c/kg, with the 16-19 micron types being the flavour of the week.

Wools of 21 and 22 microns rallied by around 75c/kg and finished strongly, indicating the market should remain solid next week.

Skirtings also recorded good rises of around 40c/kg, with the best results at the finer end.

Crossbred wools enjoyed spirited competition and climbed by 10-30c/kg.

Understandably, the pass-in rate was the lowest since September at 6.4pc.

National auction offerings in coming weeks are set to average around 44,000 bales.

Meanwhile, latest Australian Wool Testing Authority statistics reflects the swing to crossbred sheep, with the 25-28 micron range increasing 9pc compared with the same period last year. Superfine wool production also has increased by about 7pc, whilst 19-24 micron types have fallen by around 6pc.

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