WEEKLY MARKET REPORT

Week Ending 3^rd May, 2013

AWEX Northern Micron Indices Comparison

HAVE WE REACHED THE BOTTOM YET?????

No confusion as to where the market was heading this week as the poor market in Fremantle last week swept east across the Nullabor quicker than the Indian Pacific on its return journey. All three centres recorded heavy losses on the opening day as all fleece indicators in Sydney collapsed to the tune of 40 to 55 cents. Some of the losses in Melbourne and Fremantle weren’t to the extent of those in Sydney but still in the 20 to 50 cent range. Discounts for colour, cott and tender increased to the point of almost total neglect for the worst lots as the pass-in rate climbed to 30% for the fleece sector. Thursday’s mood improved as some indicators made subtle gains on the Eastern seaboard with most back by another 10 cents as the two regional indicators lost 3 and 4 cents.  The only good news was to come out of the west as Fremantle’s indicator jumped 15 cents to 990 - now well ahead of the Sydney and Melbourne indicators of 976 and 959. All microns took a lift of 10 to 25 cents in the west - a great relief to finally see some sort of recovery in at least one centre. One buyer did comment to us that it was nearly impossible to sell a container into China and another was heard to say “there looks to be no end in sight” to the falling market??? These alarming comments hopefully can be put to bed with a market recovery that looked to have started in Fremantle yesterday. The closeness of the market can be seen in the gap between 18 and 21 microns - just 90 cents.

Skirtings tracked the fleece movements but, as we have said for weeks, haven’t suffered to the extent of the fleece sector. The opening day’s falls of 20 to 30 cents across all microns and VM levels was followed by more gentle falls on Thursday of around 10 cents with most emphasis on 18 micron and broader with 3% VM and higher. The very low prevalence of heavy cott and jowl and colour in skirtings this season (when compared to the selection of 12 months ago) is helping this sector hold its own when compared to fleece prices. In fact, one buyer did ask when heavier VM skirtings will hit the market. Our answer was: ‘when it rains enough to actually grow some clover, barley grass, and Bathurst burr etc!’ Cardings had a flat week as a small rise for locks on the opening day was negated by a slight fall late on Thursday, to leave the MCI unchanged at 721 cents. Crossbreds weren’t immune to the falling market, but fell the least of any sector. Fine types (25 & 26 microns) were unchanged as 28 and 32 micron fell up to 5 cents with 30 microns back 15 cents.

Please note our text below the 2 tables that Don has provided after attending a Woolbroker Forum convened by AWI in Sydney today. It makes for very interesting reading. The next three weeks have less than 40,000 bales/week nationally. Let’s hope this is enough to get the buyers into some sort of positive action. We sell first up next Thursday, but most would like to see, apart from a dearer market, at least 3 or 4 inches of rain to take much pressure off everyone.

                                                                                                                                                                                                                                                      Ag Concepts Fwd Price Trades W/E 3 May, 2013

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

966 cents ê 29 cents compared with 26/04/2013                                   1.0236 ê 0.0016 compared with 26/04/2013

Northern Market Indicators (AUD cents/kg clean)

976 cents ê 36 cents compared with 26/04/2013

AWI Woolbrokers Forum

AWI today held an information forum for Woolbrokers in Sydney which was well attended and represented by nearly all brokers across Australia.

The main interest naturally at the moment is focused on the short term health of the wool market which has, for the first time in over three years, seen the EMI slump well under the 1000 cent mark.

But whilst we were gathered they took the opportunity to enlighten us on most aspects of their current activities. Coincidentally, last night was the beginning of the Campaign for Wool promotion which began in the UK and promoted heavily by Prince Charles. The Strand Arcade between Pitt and George St has been filled with displays, garments from the Woolmark Awards and even two trees have been covered with knitted blankets. See our Facebook page for pictures taken last night.

AWI, with a relatively meagre advertising budget, has been targeting events and the recent Woolmark Awards held in London were a good example of gaining media leverage from events. For a cost of about $1.1 million it is estimated from editorial coverage in world media to have a value of approximately $27 million. To be able to have judges like Victoria Beckham donate their time was seen to be invaluable.

Probably the most interesting session today was the Off-farm research presentation by Jimmy Jackson. Whilst China has been the centre of attention over the last decade for both processing and consumption, AWI have begun targeted work in Vietnam and Russia/Belorussia and Ukraine.

Why Vietnam, well textile manufacturing already accounts for 21% of GDP. Vietnam has an abundant water supply which is vital not only for scouring but also dying and finishing.

In the last eighteen months AWI have been able to secure 35 partners in the textile chain and they are using their contacts in other wool processing countries that are looking for joint ventures etc. One of the challenges is that all the textile processing is either cotton or man made fibres. Wool is new to them but good ground is being made.

Vietnam looks like it will be the next growth area after China, already wages are rising in China and factory workers, as they become more affluent, are moving into other areas of employment. Another strong factor for textiles out of Vietnam is the Japanese market, which has historical issues with China and would rather not wear "made in China".

There is too much to cover everything today so will leave that for later, but unfortunately there was no great insight into what is going to happen to the wool market over the next week or three. Suffice to say the tip for next week is dearer! But not by much.