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Fine wools come under great pressure
19
Sep '11
The AWEX Regional Indicators finished 1.5% lower, on average, at sales in Newcastle, Melbourne and Fremantle this week when the US exchange rate fell by 3.6%. This was the first Newcastle sale of the season.

45,020 bales were on offer, compared with 35,181 bales last week. 9.4% were passed in, comprised of 5.7% in Newcastle, 11.6% in Melbourne and 10.5% in Fremantle. Pass-in rates for Merino fleece and skirtings were 11.8% and 6.2%, respectively. 40,793 bales were cleared to the trade.

Renewed concerns about a possible default by Greece again dominated global financial news during the week. As expected, this led to a fall in global confidence, which in turn led to a flight of currency from Australia to the “safe havens” and a fall in the US exchange rate. The overnight news on Wednesday night that France and Germany appear determined to avoid Greece defaulting resulted in a settling of the US exchange rate, but still at a level that was 3.81¢ below last Thursday's close.

It was disappointing that the fall in global economic confidence happened after last week's good wool market. As has happened in previous similar circumstances, the fall in confidence was reflected in an easing in wool prices in US currency and a fall in the US exchange rate (that softened the falls in price in Australian currency).

This was seen very clearly in Newcastle on Tuesday, where the Northern Indicator fell by 39¢ in US, but only by 6¢ in Australian currency. Prices were generally down across all fleece types other than those at 16.5 microns and finer. The 16.5 MPG was up on the day, and again on Wednesday, but lost these gains in a general easing on Thursday. All AWEX MPGs up to 18.5 microns either moved up or held their ground in Newcastle on Wednesday.

The gains in Newcastle on Wednesday were not replicated in Melbourne, where the 16.5 to 18.0 MPGS eased by 44 to 68¢ and the broader MPGs eased by around 20¢, on average. The Melbourne sale was affected by the presence of some poorer types (e.g. poor colour from areas affected by rain earlier this year) and weaners wool.

The fine wools came under great pressure later in the day on Thursday, with falls of around 50¢ on the day in the fine wool average MPGs (for Newcastle and Melbourne). The traditional Italian types on offer early in the day in Newcastle maintained the strong support seen for these wools during the week.

Overall, there was a large amount of fine wool for the market to absorb this week.

The smaller change in the Western Market Indicator on Thursday was associated with the lesser amounts of fine wool in the West.

Skirtings started well in Newcastle on Tuesday and Wednesday where the market moved up nicely for the better types. Prices also moved up in the South on Wednesday, but eased in the West. The market eased on Thursday in Newcastle and Melbourne (as occurred with the fleece types), but remained firm in theWest.

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