Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

January 16, 2004

Market steams ahead

THE eastern indicator jumped another 36 cents per kilogram this week to close at 827c/kg.

The southern indicator was the most active, leaping 46c/kg.

Most wools finer than 23 micron were well sought after, especially fleece wool finer than 20 micron. In Melbourne, 19 to 19.5 micron jumped a massive 85c/kg.

Very few in the industry expected such a result, which was probably due to the dominance of one Japanese firm that decided, for whatever reason, to take a stance.

Although the higher prices are very positive news, such a jump in such a short time is not necessarily healthy.

This type of jump can be caused by panic buying rather than genuine demand. It is not the first time this type of activity has happened and it won't be the last.

Most companies have several orders that they are contracted to fill by a certain date. If one company decides to take a stance (like this week) and dominate the buying, those other remaining companies have no option but to keep bidding until they fill their commitments. This causes the dramatic lift in prices.

It is not known why this particular company took such a stance. It may have set a new benchmark in the market and set the trend for further rises, however there has been very little overseas buying interest at these levels. The market could drop back if importers are reluctant to buy.

The other positive from this week is that the price gap between microns has opened up again, which is good news for fine wool growers.

General news

MOST would be aware that the shearing express operation has failed to prove economical and has been put on hold. The cost per sheep worked out to be nearly twice the current cost of traditional wool harvesting.

I don't believe it should be scrapped completely as it was reasonably close to achieving its objective. A massive amount of money was invested and it would be a shame to see so much time and money thrown away.

Surely expert researchers can come up with improvements in coping with animal movement, believed to be the main reason for abolishing the trial.

It seemed better suited to larger, more efficient operations.

The live export trade is experiencing tough times and could well be on the verge of shutting down for the next six months in Portland and Adelaide, which has been recommended by the Keniry review. The review was initiated by Federal Agriculture Minister Warren Truss last October in the wake of the Cormo Express disaster.

Hopefully changes can be implemented sooner rather than later to avoid any such possibilities.

Like so many other areas, this also seems to be another battleground for political supremacy rather than a serious approach to fixing the problems at hand.

Market outlook

DESPITE the unexpected rise this week, we may still be in for a flat spot before a decent recovery. It may well be possible that some companies are trying to get themselves set for coming months when demand is forecast to improve and wool shortages are due to continue.

No significant market change is expected next week. China will need to start buying greater volumes at some stage soon, and once this happens we should continue to see good prices.

PAST ISSUES
January 9, 2004	September 26, 2003	July 4 , 2003
December 12 , 2003	September 19, 2003	June 27, 2003
December 05 , 2003	September 12, 2003	June 20, 2003
November 28, 2003	September 5, 2003	June 13, 2003
November 21, 2003	August 29, 2003	June 6, 2003
November 14, 2003	August 22, 2003	May 30, 2003
November 7, 2003	August 15, 2003	May 23, 2003
October 31, 2003	August 8, 2003	May 16, 2003
October 24, 2003	August 1 , 2003	May 9, 2003
October 17, 2003		May 2, 2003
October 10, 2003
October 3, 2003