WEEKLY MARKET REPORT

Week Ending 20^th March, 2015

AWEX Northern Micron Indices Comparison

CURRENCY YO-YO MOVEMENT STOPS RISE

Our fearless prediction of a solid market was spot on. The AWEX EMI could only manage a 1 cent rise to 1093 due mainly to good performances in Room 2. Fleece barely moved in any direction as 20 micron and finer were flat to sellers’ favour, bar 18s that fell 4 cents. Broader than this the losses were more exaggerated. 21s fell 10 cents while 22 to 24s lost 10 to 30 cents. To be frank, there were very few highlights. An 18.5 micron lot from Coonabarabran made 50 cents better than the indicator and a local lot of 18.6 with a 62% yield made 60 cents higher than its indicator. Worthy of note is that both lots were bought by Chinese mills, out-bidding Italian buyers, a pattern that has emerged over the past 2 to 3 weeks when the wools look more suited to the Europeans. Growers seemed happy with the outcome of this week’s sale as just 4% of fleece was passed in.

As mentioned earlier, Room 2 looked to have the biggest bearing on how the market performed. Skirtings finished rock solid with the 5% > VM types adding 5 to 10 cents to their previous values. There was a fear that Crossbreds may have reached a peak. This was not the case as this sector finished in sellers’ favour in Sydney and 5 to 15 cents higher in Melbourne as the 25 micron indicator broke through the 1000 cent mark - a fantastic level for these types. Cardings also continued on their merry way to go deeper into record territory as the 3 centres’ MCI’s are at 900 cents or better. Locks added 25 to 35 cents while stains and crutchings looked 10 to 15 cents higher. As we move through autumn there looks to be plenty of high VM oddments and cardings hitting the market. These proved a bit hard to value but, for what they are, still making reasonable money. Growers again warmed to the prices in Room 2 as 98% was sold to the trade.

The upsurge in the A$ on Wednesday night to back over 78 cents briefly appeared to put a cap on prices late in the sale. Up until this point the market looked as though it could’ve made some reasonable gains. The decline in men’s formal suiting is hurting the fleece wool sector as the big volume retailers reduce their orders. As a result the Chinese weavers are trying to off-set decline by offering more casual ranges and corporate wear. On the flip side the knitting sector is going gang-busters except for European retailers who are struggling as the Euro/US exchange rate is pushing up the price of Chinese imports. According to IMF chief, Christine Lagarde, the Euro economy is turning the corner at a snail’s pace. Also adding to financial constraints in China is the new environmental legislation introduced that the larger mills are spending money on upgrading their effluent plants that ties up finances otherwise spent on purchasing wool.

Currency fluctuations over the past 12 months has the price of wool in US$ terms the lowest for 5 years. This is a major benefit to manufacturers and designers but the margin for a price rise is nearly non-existent exposing them to volatility of price movements. Labour costs are still a big issue, not only in China, but also emerging manufacturing hubs like Vietnam and Bangladesh. Manufacturing labour cost US$2.10/hour in China 3 years ago but still lag behind India and Vietnam.

Ag Concepts Fwd Prices at 20 March

Main Buyers (This Week)