Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

June 27, 2003

Sudden wool offering increase weakens market

THE eastern wool market lost all price gains from the previous week to close at 937 cents per kilogram - a 22c/kg fall.

Large passed-in rates were evident, with a national average of 28 per cent.

Steady markets have prevailed over the past few weeks, which has largely been due to the lack of wool on offer matched against average demand.

Demand is still average and volumes of wool on offer are on the increase, hence the market is suffering.

Next week's national offering has jumped to 75,000 bales, 30,000 more than what was offered this week.

This volume may decrease, as some brokers will withdraw wool on behalf of their clients.

Market activity is poor and the perception is that it could worsen again next week.

There appears to be a trigger price level that many growers are hoping to achieve, and unless the market reaches that level they are satisfied to hold onto their wool.

A large withdrawal of wool from the market will probably help avoid major price falls, but we still anticipate a weaker market at next week's sales. This will be the first sale of the new financial year before we head into the annual three week recess.

We continue to hear negative news from all angles. Production is down to 50-year lows with an expected forecast of 2.8 million bales for next year. Unfortunately drought also looks highly likely again in certain areas, which could obviously lower wool volumes even further.

Some overseas processors believe wool is too expensive and, conversely, some producers believe prices are not obtaining the required levels for viable wool growing.

Continual pressures on local processors, exporters, brokers and producers will no doubt generate more industry rationalising in the near future.

The wool industry has experienced many cycles of various magnitudes in the past and what we are likely to experience in the near future will be one of the most significant yet.

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