WEEKLY MARKET REPORT

Week Ending 26^th September, 2014

AWEX Northern Micron Indices Comparison

SAME OLD, SAME OLD ….

The downward shift in the exchange rate is yet to help the wool market as the AWEX EMI finished the sale unchanged at 1023 cents as the AUD$ lost 1.5 cents (now down to 88.15 cents), a 7 month low. The EMI did actually move - down 1 cent on the opening day then regaining that cent on Thursday. Just two indicators recorded losses, 16.5 back 8 cents and 20s off by 2. All other microns were up to 6 cents higher. The fall in the 16.5s could have been due to an over-supply in this category as this was the 2^nd designated Superfine sale of the season. Why they persist with this concept and why some brokers seem to stack these sales with “too much” of the same type, notably superfines, when demand can’t cope with the big volume of the same type in the one sale is only hurting the grower with the risk of lower prices. Time and again we saw Newcastle sales take a tumble due to the over-supply of the same type and still the lessons haven’t been learnt.

In US terms the market took another hit as the exchange rate fell. 16 cents came off the indicator, now 902 in US terms, 12% or 126 cents behind 12 months ago. In the same time the currency has fallen just 5 cents (6%). Most experts see the shifting exchange rate caused by diminishing Chinese growth prospects, low commodity (coal and iron ore) prices and interest rate expectations as the causes for change in sentiment for the currency. Again this week, as over the past month, good spec types were keenly sought after with tender, high-mid break lots losing ground, widening the gap, although the odd sound lot, +40 nkt, with very high mid-breaks made up to 15 cents better than their indicators with VM levels up to 2.5% attracting little or no discount at all.

Skirtings looked to suffer from the same problem as the fleece room - too much of the same type! Buyers couldn’t handle the big volume of sub 19 micron up to 5% VM, these down by 5 to 10 cents, with the broader burrier lots solid. Cardings lost some ground as locks fell about 5 cents while stains and crutchings remained solid. Crossbreds enjoyed the drop in the AUD$ with most types in this sector adding 5 to 10 cents.

More news from the Nanjing Wool Conference: The mood was positive and upbeat although two big issues are concerning Chinese manufacturers. The disposal of effluent (as processors spend capital to upgrade their recycling and disposal methods to comply with new regulations to take effect from January 1^st 2015) is drawing capital away from purchasing wool. The other is, of course, access to credit which is still hindering the purchasing patterns of some mills. There is concern over the imbalance of wool either side of 18.5 micron, too much finer than this micron and not enough broader.  The “non premium” being paid for finer types is due to hungry fine wool as well as these microns being grown in non-traditional fine wool growing regions that can’t keep dust and burr out and are unable to grow the “style” that attracts premiums. Also, a surprising comment from Chinese agents and users that there were “too few exporters”. With over 500 delegates this is by far the premier trade event on the wool calendar. Exporters found good opportunities to write new business with most reducing or eliminating held stock positions and quick shipment for new orders taken. This augers well for the short term as cash becomes available locally for buying. We sell next Wednesday, with the national catalogue the largest since February, totalling 47,000 bales.

   Main Buyers (This Week)