The market has turned down since the lift in prices in January, when the AWEX Eastern Market Indicator (EMI) rose by 39¢ to 1111¢. Unfortunately, a series of downturns during March took the EMI back to 1059¢ in the last sale prior to Easter.
24 micron and crossbred wool have held on to their gains since the end of last year. The fine wools were most affected, with their AWEX Micron Price Guides mostly down by 7 to 8% since the first sale in January. Medium Merino MPGs are down by 4 to 5%.
The EMI is 11¢ less than at the start of the season and the Western Market Indicator (WMI) is 10¢ higher than in Sale 01. Reports from the wool trade indicate that demand has eased significantly in China over the last month.
The number of bales on offer has been consistently above the same weeks last year since October when the market turned around after the early season price falls. AWTA tested3.2% more wool in the nine months to the end of March. The current production forecast is for an increase of 0.9%.
The US exchange rate has ranged between 102.50 ¢ and 104.50¢ during March. The Australian economic outlook is more subdued than 12 to 18 months ago, but is still robust by global standards. Consequently, most financial analysts expect the US exchange rate to remain above 100¢ for the foreseeable future.
There is considerable discussion about the impact of the high exchange rate on Australian manufacturing industries and on commodity export prices. Official interest rates are low by Australian standards at 3%. However, this appears to be having minimal impact on exchange rates, particularly while a number of other countries are “printing money”.
Newcastle Wool Sales
It was a nostalgic moment when the last elite wool sale was held in Newcastle in February. Newcastle buyers and brokers held a very successful farewell function.
The National Auction Selling Committee has nominated seven sales as Australian Superfine (AS) feature sales in Sydney next season to provide Superfine wool growers with a replacement selling system for Newcastle.
Australian Dollar Chinese Yuan Conversion
The Australian Prime Minister, Julia Gillard, has just completed a five day visit to China. The visit had a high emphasis on trade issues, two of which were of potential significance to the wool industry.
- Agreement was reached for Australia to become the third country, after the United States and Japan, to establish direct currency conversion facilities with China.
- It is understood that some discussion was held about the Australia / China Free Trade Agreement. It has moved slowly since 2004 when it was proposed. Wool is a key part of the negotiations.
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