Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

September 19, 2003

Market slips

THE eastern market indicator closed at 902 cents per kilogram this week, 9c/kg lower than last week.

The northern indicator actually gained 3c/kg, while the southern indicator fell by 19c/kg. This was mainly due to the superior wools being offered in Newcastle, which in most cases received premium prices.

The southern indicator has shed 36c/kg the past two weeks, with the one positive from this week being the very firm carding market.

Twenty per cent of the national wool offering was passed-in, with Newcastle having the lowest passed-in rate of 13pc.

The drop in prices in the south was caused primarily by a rise in the Australian dollar combined with slowing demand from local processors and Europe.

Interest from China is still very low, which is probably the most significant factor in relation to the average market activity.

Sheep prices continued to rise this week, with Merino ewe lambs selling for $92 per head and 2-year-old Merino ewes for up to $163.50 at sales held in the Riverina of NSW.

Recent rainfall has transformed much of NSW into a lush green landscape and many farmers are desperate to try and re-stock.

We are currently experiencing part of a cycle that has been absent for many years in the sheep industry - the "boom'' times.

Whilst sheep prices are at record levels, the fine wool market remains fairly subdued.

A couple of articles appeared this week regarding the fine wool situation. One outlined the returns for broader wools as opposed to the fine wools, and how two to three years ago many growers opted to chase the more profitable fine wool market.

It's easy for us to look back now, but many growers were actually advised that they should be concentrating on growing finer wool because that's where the greatest demand was.

Another article illustrated the premiums commonly paid for fine wool over the past 30 years, comparing 19 micron wools to 21 micron types. It suggested that fine wool will again bounce back.

However in considering this we must realise the rule of supply and demand. Fine wool now makes up a much greater proportion of the clip, while broad wool is at its lowest level of all time.

Currently, fine wool prices are average and broad wool prices are good - and that is a perfect illustration of supply and demand.

Overall demand at this stage still looks average, with limited international buying activity.

Next week the market is likely to remain unchanged, or possibly drift slightly downward.

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