WEEKLY MARKET REPORT

Week Ending 21^st August, 2015

 AWEX Northern Micron Indices Comparison

MARKET COMES DOWN TO EARTH WITH A THUD!

Sentiment changed dramatically as last sale's gains were completely wiped out as the market took a turn for the worse. This came out of the blue as most “experts” late last week were of the same opinion - a stable market as just 32,000 bales were on offer as Fremantle sat this week out due to lack of wool. Things had changed by Monday as local trading houses with open positions and little cover had bought enough for the short term and were happy to allow the market to find levels where new business could be found. Chinese mills were comfortable with this lead as the market had an 8% rise over the previous 2 sales when the 4% devaluation of the RMB and the rising market were combined. This, with purchasing urgency gone, saw some mills sit on the fence this sale. Still a factor is the short stock positions in front of wool processing machinery and delivery deadlines for retail garments for the Northern Hemisphere winter giving some hope the market will recover sooner rather than later.

This sale was again a mirror image of last week only in reverse as the EMI lost 40 cents (a 41 cent rise last sale) - most fleece indicators falling 55 to 65 cents. At 1263 the EMI is still 26% higher than 12 months ago. In US terms the loss was 35 cents (now at 929) - a figure that some traders say is close to the price Chinese mills are comfortable with to book up further business. Discounts grew dramatically for VM, colour, cott and high mid-breaks, in some cases doubling from the 2 previous sales. Maybe, as a lead into next week’s opening “designated super-fine” sale of the season, the odd super-fine type with the right specs came under keener competition than most types as highlights were few and far between. Growers were caught by the sudden price falls as 22% of all fleece was passed in.

Skirtings had an easier time of it as the pull-back in price was nowhere near the extent of their fleece counterparts. Most types were quoted as 20 cents lower from last sale but, comparing types and prices, some actually looked higher than last week. Cardings bucked the falling trend of the combing types to post a 6 cent gain - the 2 MCIs on the East Coast now within 2 cents of each other, 1073/1075. Rises across all types in this sector were in the order of 10 to15 cents. Crossbreds also had a steady sale as movements either way were minimal for the finer microns < 26 to losses of up to 10 cents for 28s and broader. One lot of crossbred lambs that had been valued at 620 cents and passed-in twice for low 500s sold for 650 cents - a great improvement in a falling market.  

Reasons for this week’s fall are numerous. Apart from the abovementioned rapidly rising market, currency devaluation and buyers covering short term positions, question over global economic growth and stock market uncertainties and the massive explosion in the port city of Tianjin, east of Beijing, have all contributed in some way. Even with a small offering, 32,000 bales, there can be no guarantee that this will force buyers to “buy up” as was the case in late June when just 23,000 bales couldn’t prevent the market from falling 36 cents that sale.

What might help is the latest media release from AWI forecasting wool production to ease by 4.3% to 332 mkg, a 3.7 % fall in shorn sheep numbers which reflects more sheep slaughtered in 2014/15 and fleece weights back by 0.7%. This information will be broadcast to all mills by tonight. Next week’s offering of 41,000 bales will test the strength of demand with a firm market at best a good result.

Ag Concepts Fwd Prices as at 21 August 2015

Main Buyers (This Week)