Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

January 30, 2004

Market slides again

THE eastern market indicator closed yesterday at 789 cents per kilogram, equating to a fall of 22c/kg.

Fleece wool types between 18 and 24 microns were most affected by the decline, receiving discounts of 25c/kg.

Twenty per cent of the wool offered was passed in and 8.5pc was withdrawn, which now makes bales in store (being held) nudging 700,000. The majority of it is Merino wool finer than 20 microns.

The estimated clip volume for this season is 2.4 million bales.

We hope the market improves so wool can move out of the stores. If not, we may be heading for a scenario similar to that of the early 90s when we had the equivalent annual production sitting in the stockpile. We know the affect this had on prices for the next decade.

This week's market activity was proof that the large jump two weeks ago was due to a squeeze in supply combined with a rush on shipment commitments, rather than true levels of demand.

The main drop in prices occurred on Wednesday. On Thursday the market stabilised to a point where price levels were more realistic with current levels of demand.
However, the trade is expecting prices to remain solid and perhaps strengthen soon.

General

A NEW wool classing specification is due to be released in July that enables classers to document any information relevant to the running of exotic sheep breeds among Merinos.

The new specification is another step to help maintain our reputation for producing and delivering clean, white Merino wool, and hence is strongly supported by the trade.

November 2003 wool exports were down by 18.3pc in volume and 41.9pc in value compared to the previous year. The progressive total for the year to date is volume down by 27.7% and value down by 38.3%.

The Australian sheep population has decreased from 117.5 million last year to 99.8 million this year. In New Zealand, sheep numbers have gone from 60 million in the early 90s to 39.5 million currently.

There may no longer be the need for mulesing. Trials are under way whereby protein is injected into the breech area of the sheep and this apparently reduces wool growth and density, but also stretches the skin to remove any wrinkles from the treated area - an area that is generally most prone to flystrike. This is being carried out by Professor of Animal Science at Adelaide University, Dr Phillip Hynd.

The project is also funded by AWI and will be trialled over the next six years.

Some positive news came out of India this week, where the Special Additional Duty (SAD) on imported goods was abolished. The removal of SAD should enable Indian processors to spend an extra $35-$40 dollars per bale.

Outlook

PRICES in the coming fortnight should be solid and may trend upwards.

As the above figures suggest, very little wool has been exported over the past year and we should be getting to a point where demand for larger volumes will start to increase, particularly into China.

It was during March last year that the market started to slide in a major way.

This year could be quite the opposite, whereby the wool market should start to improve.

Some wool types are still yielding good returns, but the price gap between microns needs to increase, particularly for the finer end.

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