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Wool market finishes 8.5% lower
24
Oct '08
The Australian wool market finished 8.5% lower, on average, at sales in Sydney, Melbourne and Fremantle this week.

The AWEX EMI fell by 75¢ (-8.9%), ending the week at 764¢/kg. This reflected falls of 88¢ (-9.9%) in the North and 64¢ (-8.0%) in the South, with their corresponding Regional Indicators finishing the week at 797¢ and 736¢ clean, respectively. The Western Indicator fell by 61¢ (-7.7%), finishing the week at 729¢.

In a three day sale in Sydney and Melbourne, the AWEX EMI fell by 62¢ on Tuesday, by 6¢ on Wednesday and by 7¢ on Thursday. The Western Indicator fell by 53¢ on Wednesday and by 8¢ on Thursday in a two day sale in Fremantle.

57,149 bales were on offer, compared with 55,911 bales last week, of which 33.3% were passed in, comprised of 29.6% in Sydney, 35.5% in Melbourne and 34.6% in Fremantle. Pass-in rates for Merino fleece and skirtings were 43.2% and 26.4%, respectively. 10,239 bales (15.2%) were withdrawn prior to sale and re-offered bales made up 9.6% of this week's offering.

The New Zealand Merino Company also offered 2,810 bales in Melbourne on Wednesday of which 51.6% were passed in. 90 bales (3.2%) were withdrawn prior to sale and 0.9% of the bales were re-offers.

The US exchange rate (source RBA) was 3.23¢ higher on Monday when compared with Thursday of last week. It was then down by 0.55¢ on Tuesday, by 2.87¢ on Wednesday and up by 0.01¢ on Thursday to close at 66.63¢, down 0.18¢ (-0.3%) since the last sale. The exchange rate against the Euro rose by 2.09 Euro cents (+4.2%) to close at 52.05 Euro cents on Thursday night. When looked at in other currencies, the AWEX EMI moved down by 52¢ (-9.3%) in US terms and by 21¢ (-5.0%) in Euro terms when compared with the previous sale.

The soft demand in the current financial crisis and weak competition continued this week with falls across all micron ranges and wool types. It was not helped by the announcement last Friday that the expected offering had increased by 9,600 bales during the week.

History shows that this invariably contributes to a fall in the market, which in turn leads to a higher pass-in rate with probably no net change in the quantity of wool sold. A lose-lose situation. Other factors in play during the week included the increase of 2.7¢ in the US exchange rate between last week's close and the start of this week's selling and the weaker demand for fine wools after last week's Newcastle sale. All of these factors contributed to the large fall in the market in Australian currency on Tuesday, particularly among the superfine wools on offer in Sydney. The fall of 62¢ in the AWEX EMI was 21¢ when converted into US currency.

Falls in the AWEX Micron Price Guides (MPGs) for Merino wools varied from -7% to -11%; being down by 107¢ clean for 16.5 microns, by 132¢ for 17.0 microns, by 136¢ for 17.5 microns, by 110¢ for 18.0 microns, by 112¢ for 18.5 microns, by 98¢ for 19.0 microns and by 72¢ for19.5 microns. The 20.0 micron wool average MPG was down by 80¢ clean, 21.0 microns by 71¢, 22.0 microns by 63¢, 23.0 microns by 52¢, and 24.0 microns by 64¢.

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