Weekly Market Wrap

Adrian Field Trading Manager

With Adrian Field, Melbourne
Assistant Trading Manager

October 31, 2003

Market still weak

THE market continued to weaken this week but only slightly.

The eastern indicator now sits at 807 cents per kilogram, 3c lower than last week’s close.

The market has fallen 120c/kg in the past six weeks, and hopefully it’s not far off the bottom.

Not all types were cheaper. Wools of 19.5, 25 and 26 microns increased slightly, as did Merino carding types.

To further illustrate what was explained in last week’s market update, two large wool trading/exporting companies have announced that they will cease their trading operations in the coming months, and one will shut down their wool division completely.

This now seems to be a common trend in the industry, and it looks highly likely that there’s similar news to come.

For years, many in the industry have believed we have needed a real shake-up – well it has now well and truly arrived and there’s no doubt that in five years we will see an industry structured vastly different to that of 15 years ago.

As mentioned previously, we are currently experiencing effects from a reduction in global demand combined with a massive reduction in clip size. There are now “too many people trying to feed off that shrinking pie (clip)’’.

It is understandable that many traditional wool producers are opting for some other source of income.

However, we still believe that “once the dust settles’’, the industry will be solid.

Woolgrowing and breeding will continue to become more efficient and effective, and, provided the market stabilises, it will be profitable.

The price received for wool is obviously the biggest factor, but something that’s almost as significant is combating the costs involved in producing it – they continue to climb. This is where breeding improvements, such as higher wool cut and worm resistance, need to be further developed. Alternative methods of harvesting at a lower cost are also crucial. Fortunately, there is now a much greater focus on these areas.

Successful woolgrowing is becoming more scientific.

Meanwhile, the market will likely continue along the same path next week – we are looking forward to some stability.

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