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Soft trading in Aussie wool market
Nov '11
Australian Wool Industries Secretariat Inc (AWIS) releases wool sale report for the week ending 25th November 11.

The Australian Wool Exchange (AWEX) Regional Indicators finished 0.7% lower, on average, at sales in Newcastle, Melbourne and Fremantle this week when the US exchange rate fell by 3.7%.

It was another market that finished in a different manner to the way it started. All Regional Indicators were down in both currencies on their first days of selling, with the fall in A¢ partly buffered by the fall in the US exchange rate. The situation reversed on Thursday, when demand was strong from the start, and the Eastern Market Indicator (EMI) rose by 2¢ in US¢ and by 18¢ in A¢.

The fall on Tuesday was not unexpected, given the general global financial concerns and the soft finish the previous week. However, the upturn on Thursday surprised most people, as the global economic outlook was unchanged on Wednesday night. There were trade reports of inquiry from China and Italy on Wednesday night.

The Eastern Market Indicator (EMI) at 1192¢ was 181¢ higher than in the same week last year; and the season average of 1241¢ is 325¢ higher than the season average at the end of Week 21 last year.

The greater fall in the Western Indicator was again due to there being no sale there last Thursday or this Tuesday, when the Eastern Market Indicator - EMI fell by a total of 28¢.

43,499 bales were on offer, compared with 45,117 bales last week. 12.1% were passed in, comprised of 9.0% in Newcastle, 12.1% in Melbourne and 17.7% in Fremantle. Pass-in rates for Merino fleece and skirtings were 11.7% and 9.1%, respectively. 38,214 bales were cleared to the trade.

The year-to-date offering is 789,355 bales. It is 6,301 bales less (-0.8%) than the same time last year. This is the first time that the progressive offering has fallen behind last year since Week 1, when there was no sale in Fremantle.

The New Zealand Merino Company also offered 1,870 bales in Melbourne on Wednesday of which 48.4% were passed in.

The US exchange rate continued to fall, as the immediate economic outlook continues to look difficult with bond rates of 6% to 7% in affected Eurozone countries; and currency moving from Australia to the “safe havens”.

Financial commentators say that the global outlook was also affected by news that the bailout for a major European lender, was in doubt; and the Chinese Purchasing Managers' Index (PMI) fell from 51 in October to 48 – the lowest for 32 months. A PMI of 50 is seen as the threshold for expansionary economic activity.

The third Newcastle sale of the season moved down on Tuesday, as was generally expected, but it performed well under the circumstances as buyers responded favourably to the quality of the offering. Prices held on Wednesday and moved up on Thursday. The rises on Thursday were sufficient to lift all but two of the Northern 16.5 to 19.5 AWEX Micron Price Guide (MPGs) into positive territory.

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