Weekly Market Wrap

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With Adrian Field, Melbourne
Trading Manager

November 24, 2006

Large offering puts pressure on market

THE eastern market indicator dipped 16 cents per kilogram this week to close at 826c/kg.

The increase in offerings leading into the new year, a higher Australian dollar and reduction in demand all contributed to a downward trend.

Passed-in rates jumped sharply to finish at 19.4 per cent - the highest level in months.

Nearly all types received significant discounts apart from 24-26 micron fleece wool and cardings. These eased slightly.

Southern region

Merino fleece types fell by 20c/kg to 45c/kg, with 18.5 micron wools most affected. Broader 25 micron types lost only 5c/kg.

Merino skirtings also shed 10-20c/kg, with higher fault wools most affected.

Crossbred fleece wools declined by 20c/kg overall, with 28.5 micron and broader types receiving the biggest discounts.

Carding wools eased 5-10c/kg, with stains and locks most affected.

Next week's sales will be held in Melbourne, Fremantle and Newcastle, with another larger offering of 68,054 bales rostered to go under the hammer.

The wool market can change very quickly, especially being a volatile commodity. At the end of last week prices looked set to continue, but the combination of larger offerings, higher Australian dollar and softening demand put pressure on the market.

Prices are not expected to follow this week's falls, but there is the chance they may dip further. As more producers attempt to capture the good market levels, offerings continue to rise. Many growers want to cash-in quickly for the Christmas/New Year break.

Poor market demand is quite common this time of year, especially as we get closer to the final sale before the Christmas recess. The final two sales prior to the recess often produce poor prices, especially if offerings are larger than normal.

Most exporters are aiming to finish current orders and ship them before the three-week recess, and will keep new orders for the new year to a minimum, as holding costs (interest and storage) can add up quickly.

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