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Aussie wool market performs admirably this week
Jul '13
Although the prevailing market sentiment has been very negative this past month, the wool markets performed quite admirably this week to close out selling in a more positive tone prior to the annual three week recess. Whilst the first two days saw prices retreat, the final day of auctions witnessed resurgence in interest, and the strong competition across the offering forced price levels back to near the average starting levels, with the AWEX EMI losing just 4acents over the week.

On a pleasing note, the Eastern Market Indicator headed into the break in sales remaining above the magical (and profitable) 1000acents/kg mark at 1007.The abrupt, but short-lived, mid-week rise in the AUD:USD exchange rate to approach 0.93 actually seemed to spark off some fresh prompt business out of India and China late on Wednesday.

This added more impetus to the keener buying pressure from the exporters to complete their forward orders already evident in the market, and some late indent buying from Chinese interests. Anecdotally, a surprising anomaly of the past 3 years is that quite often significant rises and falls in the exchange rates go against economic thinking; local prices fall when the currency gets “better” and rise when the currency exchange strengthens, and this past month movements appear to bear that theory out.

The long suffering sellers of superfine wool finally saw some encouragement this week, as the sector led the price improvements. Gains of up to 25acents were posted for most types finer than 18.0 micron, with the finer the wool type; the more the price was increased. With such a low gap existing between Superfine and medium Merino fleece this needs to continue for quite a few sales for the status quo in price premium to be re-established.

Going against the seasonal trend, the fine and medium Merino types 19.5 to 23.0micron fell this week by up to 10acents, whilst their finer counterparts rose. The most affected were the coarser types broader than 22.0 micron, however this sector is still considered over-priced by buyers and levels are only being held up by the severe lack of supply in this area.

Crossbred types lost a little ground this week, but only at the finer (28 micron and finer) end and by only 5 to 10acents. The coarser types remain keenly sought and levels were maintained.Carding types of all descriptions remain at the same lofty heights in price comparatively and continue to be the stand out performers in the market.

Despite the fact the market finished on a positive note, the best thing the market can take at the moment is a breather.

Hopefully the break in access to wool for the major users will build up some demand and we can head into the next half of the season on a better note. Traditionally the Chinese don’t have large production volumes in the midst of their summer (July/Aug), but as we head into Sept/Oct we should hopefully see demand pick up. The break will alsoallow some pressing credit and access to finance issues get sorted out and local buyers bank accounts be replenished.

Australian Wool Innovation Limited

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