Market Update September 2010

WOOL MARKET UPDATE
Friday 27th August 2010
Market Commentary:

Since the commencement of selling in the new season we have finally witnessed a serious rebound in fortunes for the super fine markets across Australia. With very low volumes of quality super fine types on offer, the price levels have commenced reversing the downward trend of the past 18 months and have maintained the upward rally consistently over the past three weeks of selling.

All quotations for fleece descriptions of 18.5 micron and finer have risen by at least 50ac/clean kg with rises of 100ac/clean kg being seen on the few better strength and style, typical Italian specification lots. The market is showing a tendency back to price premiums for the better style and strength wool and types showing more elasticity (compression). Some of the better premiums are more evident in the 17.5 to 18.5 micron area, with many buyers looking to source a better quality end product.

Significantly the difference in this rally appears to be the strength of competing operators away from the usually dominant buyers in New England and to a lesser extent, Schneider. Companies such as Viterra Wool, Queensland Cotton and Fox and Lillie have purchased many bales one would normally expect the Italian operators to buy

Whilst pleasing to see the superfine market change direction into positive territory, it is widely acknowledged that prices will need to continue to build up to levels of profitability to encourage grower production of these types, which has been reported to have dropped by as much as 30% over the past year or so, with the obvious competing force of coarser heavier cutting merino types and the lamb and mutton markets. It is very evident though that the Italian interests are far keener than they were last year and it is expected that they will flex their buying power in coming weeks and arrest the leakage of their types to other sources, hopefully giving further impetus to the gross returns of growers.

Merino fleece types coarser than 19.0 micron have been losing ground the past few weeks, with 10 to 15ac/kg falls. Following the Chinese government decision to ban the import of greasy wool from South Africa due to the Rift Valley Fever problem, the market in RSA has fallen dramatically. Subsequently the cheaper tops and scoured product available from users has initially impacted negatively upon the Aussie market, with many Chinese top makers slowing production or turning to finer types. Notably, only a very small percentage (8 to 12% of clip) of South African wool is usually delivered in greasy form to the Chinese top makers.

AUD v USD = 0.8860 AUD v EURO = 0.6974

Ausfine Closing Quotes - Merino Fleece (clean cents per kg.)

OPENING SPECIALS

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Plain Colours

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