WEEKLY MARKET REPORT

Week Ending 10^th May, 2013

AWEX Northern Micron Indices Comparison

PHEW…A RISE AT LAST!

It was with great relief that our expectations of a stronger market came to fruition. The late Thursday surge in Fremantle last week gave us an inkling that there could be a turnaround and seeing the Northern Indicator back above 1000 cents was very welcome. Even more promising was that it finished in the same tone as the previous week strengthening towards the end of the day yesterday.

Last week we had quite a few lots passed-in well below our pre sale valuation and we immediately listed these on Wooltrade. During the week, as the market rose each day, buyers began picking off lots that suited from the previous week with most lots making between 20 and 50 cents more than they were passed in for. As of today we have sold over 100 bales from last week’s sale on Wooltrade.

One factor which has had an impact is the declining size of the offerings which this week was just over 36,000 bales and forecasts for the next month are similar. The fleece offering in Sydney yesterday was the smallest in 12 months. The other interesting statistic this week is the small gap between 18 and 22 micron which is around 100 cents. The five year average is 366 cents demonstrating just how weak fine wool prices are.

Obviously yesterday we had a good clearance with all types having strong competition, yet the number one buyer Viterra was ominously quiet. They did not even feature in the top ten this week. Cardings remain the standout as the merino carding indicator pushed a further 25 cents higher.

Last week we reported from the AWI Broker Forum and how AWI are pursuing other opportunities for wool processing destinations as China has almost a monopoly yet, like the Japanese 20 years earlier, is beginning to show signs of increased costs and, would you believe it, looming labour shortages! It seems as the factory worker becomes more affluent and their lifestyle improves they seek better, higher paid employment in the cities. Great for consumption, but posing an issue for processing. We spoke last week about Vietnam, this week we’ll continue with Russia and Belarus/Ukraine.

“To Russia with Wool” is the campaign to rekindle the old one time major relationship with the Russian bloc. We remember them being major buyers of all our 22-24 micron wool. Every Russian soldier had two woolen army uniforms, and the end of the cold war spelt an end to that and their consumption of 33% of the Australian woolclip. Today Russia has a high standard of living and an emerging affluence with a high disposable income, a tax rate capped at 13%, free health and education and almost no home mortgages, and a cold climate. Whilst labour rates there are high, just over the border in Belarus and Ukraine there are very low labour costs and this is the target of AWI’s interests in getting wool back centre stage in Russia with their 200 million population. Late last year AWI led a party of major Australian wool exporters to Russia and Belarus to explore opportunities and begin a campaign aptly named “To Russia with Wool”.

The lower dollar spurred on by our interest rate cut should continue to help next week with Macwool offering a large 1700 bale catalogue on Wednesday.    

Ag Concepts Fwd Price Trades W/E 10 May, 2013

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

992 cents é 26 cents compared with 03/05/2013                                   1.0236 è 0.0000 compared with 03/05/2013

Northern Market Indicators (AUD cents/kg clean)

1009 cents é 33 cents compared with 03/05/2013