Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

May 23, 2003

Market stabilises on smaller offering

THE market eased again this week, but not as dramatically as the past fortnight.

The southern indicator finished at 838 cents per kilogram, 13c less than the previous week's close.

Of the 54,000 bales originally allocated for sale, 33 per cent was withdrawn and a further 24 per cent was passed in. This fact alone enabled the market to stabilise a little.

A positive sign was that poor style, short and high fault wools were more sought-after than previous weeks, and hence their value improved slightly.

In recent times we have witnessed the physical market almost mirror the futures market and vice versa, but this was not the case this week. While there were sudden rises in the futures market, there was no affect on the physical market. In fact the trend was quite the opposite.

Trading activity was again fairly poor. China is still very quiet, with the strengthening Australian dollar not helping matters.

Europe was a little more active earlier and then later in the week, evidenced by the improved demand for buyers' traditional types. However they are still reluctant to commit themselves to any substantial volumes of business, preferring to see more stability in the marketplace.

Next week's offering totals 46,600 bales, 8000 fewer than this week. With such low volumes on offer, the market should hover around current levels.

We will continue to see subtle changes in the market due to the ongoing nature of common trade variables, including fluctuating currencies, trade activity and associated demand, and volumes offered.

From studying indicator graphs over the past 20 years, it is evident that 20-22 micron wool is still in a healthy position, and 23-28 micron wool is substantially better than the average. Obviously, we also need to consider, however, that production costs have increased significantly.

Meanwhile, an interesting article in the media this week outlined that there has been a dramatic move to sheep meat production.

Therefore, we should expect to see volumes of broader wools such as first cross and crossbred types increase.

Almost 15 years ago sheep meat bred stock accounted for 10 per cent of the sheep population. Figures released recently suggest it is now 44 per cent.

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