Weekly Market Wrap

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With Adrian Field, Melbourne
Trading Manager

August 3rd, 2007

Quota reduction drives price plunge

THE impact of Chinese importers having their quotas reduced by the Chinese Government last week was disastrous.

The eastern market indicator plummeted 55 cents per kilogram this week to close at 874c/kg.

Most of the price falls were recorded early in the week. This was perhaps an over-correction, considering the market recovery later in the week.

A total 52,949 bales were offered, of which 23.3 per cent was passed in.

Sales were held in Fremantle, Sydney and Melbourne. All wool types and microns were affected.

Southern region

All Merino fleece was 40-60c/kg cheaper, with the exception of 19.5-micron wools, which drifted by about 20c/kg.

Merino skirtings were generally 60c/kg lower across the board, while crossbred fleece dipped by about 30c/kg overall, with 30-31 micron types least affected.

Even cardings recorded massive falls, with most types shedding about 60c/kg.

Hopefully we have experienced the worst of the price falls. The fact that offerings are quite small (at this stage anyway) in the weeks to come should help stabilise the market.

It will be a very interesting couple of months ahead. We will get a true indication of what type of demand there is for wool.

If the market remains firm during such difficult circumstances, there's obviously good demand for wool and we should experience significant improvement once the next quotas are released.

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