WEEKLY MARKET REPORT

Week Ending 13^th June, 2014

AWEX Northern Micron Indices Comparison

DEMAND WANES … TOUGH TIMES AHEAD

Another disappointing wool sale this week as the 3 centre offering was the third smallest for the season with Fremantle operating for one day with just 6,500 bales catalogued. All prospects were for a drift in prices and the market was true to form. Steady falls over both selling days saw the EMI slip by a further 8 cents to 1029. The market reversed the falling trend in US terms, adding 2 cents as the exchange rate moved in favour of the $AUD against the $US (up by over 1 cent) to sit just below 94, this shift in the exchange rate not helping. Falls were across the board but restricted mainly to the finer indicators. The largest declines were from 17.5 to 19.5, ranging from 20 to 35 cents. The finer types from 17 micron fell by an average of 16 cents with selected best style, sound types attracting good buyer support due, in part, to a stylish Launceston catalogue to finish the sale just in buyers’ favour as were the 20 to 23 micron indicators, down by 5 cents.

Much has been said about the volume of wool finer than 19.5 that is around and the disastrous effect on this sector. We have reported earlier in the season that the amount of wool finer than 19.5 has increased by over 350% in the past 20 years, as the clip in this period has halved in number. Sure the drought has played a major part this season but decades of breeding finer rams looks to have taken its toll on fine wool prices. This sale is a classic example. 56% (19,000) of the total national catalogue was finer than 19.5 - the highest proportion since AWEX records began in 1995. The gap now between 18s and 21s is just 38 cents, the smallest since the 18 micron price guide commenced in1998. The price gap is more alarming from 17 to 22s, 110 cents.

Skirtings found the going tough but not to the extent of the fleece room. A solid opening day was followed by a softer tone for the finer, low VM types as 18s and finer up to 3%VM gave up 10 cents, whereas the broader, burrier lots looked fully firm by the end of the sale. Cardings edged higher, following on from last sale’s good increases as a subtle shift for locks of 5 to 10 cents saw the MCI add 2 cents to its value, now 805 cents. The crossbred sector, although small (16% of the offering on the eastern seaboard), struggled to move as the lack of demand and currency movements played its part to see broader indicators full firm and finer types around 5 cents cheaper.

The only way to describe current trading conditions at the moment is “very tough” according to most buyers. It is hard to pin the Chinese down at any price let alone one that could suggest a rise in the market. As reported in this week’s “The Land”, page 83, optimism is a good thing but it needs to be backed up with confidence, something that is lacking in buyers’ minds at the moment. As mentioned the knitwear sector is going well and the Pitti Filati Expo in Florence in July is an opportunity to do more business in this sector. In the short term, the smallest sale of the season (24,000) may not rescue the market from its current slide. At least it might rain again this weekend!!

Main Buyers (This Week)

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

1029 cents ê 8 cents compared with 6/06/2014                                     0.9380 é 0.0094 compared with 6/06/2014

Northern Market Indicators (AUD cents/kg clean)

1046 cents ê 7 cents compared with 6/06/2014