WEEKLY MARKET REPORT

Week Ending 10^th August, 2012

Northern Micron Indices Comparison: Source of information: AWEX

A DISASTROUS START

The annual three week winter recess may have given brokers and buyers time to catch their breath and catch up on work that gets put to one side and for many buyers have those long overdue face to face meetings with agents or clients overseas and prepare for the run through to the end or the year, or in some cases just take a bit of time out from the rigors of week-in week-out wool sales. Whatever we all did, didn’t work! Talk of the market opening on a softer note as early as last week rang true. A national catalogue of 50,000 bales had been amassed over the recess, not overly large by anyone’s ideas of “too much wool”. A 4 cent rise in the exchange rate certainly wasn’t going to help the market with the AUD$ at a tick over 106 US cents. The EMI collapsed by 67 cents to sit under that psychological number of 1000 cents now at 995. From the outset the market retreated in free-fall with big losses recorded on the opening two days. Thursday saw the market steady as some of the better style lots (finer than 18.5 micron) firmed up to 10 cents higher. This, however, was of little comfort as the falls were across the board with 18 and 18.5 losing an average of 30 cents with all other indicators toppling by 50 to 80 cents. With the big fall also came a big pass-in rate - 22% nationally - with fleece wool in Fremantle and skirtings in Melbourne, clearing just 71.5%. Discounts were back in vogue for all faults as lines with colour, cott and high levels of VM copped a hammering. The discount between 1 and 2% of VM is around 40 cents clean, this is normally around 10 cents when the market is going well.

Skirtings failed to escape the carnage as well with big reductions from the outset. By week’s end prices had slumped to the tune of 60 to 80 cents for most types and descriptions with price falls reducing on Thursday. There are still some clips carrying cott and jowl in their pieces which, in some cases, are attracting token bids. It is still necessary to remove these faults from your line of BKN if you can to soften the blow of the discount. Cardings weren’t immune to price reductions as the MCI fell 49 cents in Sydney to 561 cents. This amounted to losses of 50 to 80 cents for all types and descriptions across the sector. Crossbreds took a hit as well due to the unfavourable exchange rate. Finer types from 26 to 30 micron gave up an average of 60 cents while the 32 micron indicator was down by 40 cents.

A shocking sale to begin after the recess. The big problem is still a lack of demand from Europe and an increasing amount of ‘Tops” in China. There is no real quantity of greasy wool in China, but on-selling tops and combed wool is becoming harder and harder. Clients who took a futures contract are now looking at a 100 cent gain on wool to be sold over the next month or so. We can only hope the market will settle over the next few weeks as quantities will settle around 40,000/ week. Hopefully Chinese attention moves from the Olympics to buying wool.

                Eastern Market Indicators (AUD cents/kg clean)                        AUD/USD Currency Exchange

                Eastern 995 cents ê 67 cents compared with 12/07/12                                 1.0609 é 0.0421 compared with 12/07/12

                Northern Market Indicators (AUD cents/kg clean)

                Northern 1007 cents ê 62 cents compared with 12/07/12