Wool hit by strong US dollar

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Jenne BrammerThe West Australian
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The wool market fell by 7c/kg last week, when the Eastern Market Indicator closed at 1029c clean.

The fall came after an erratic week, with large drops in the market followed by some recovery toward the end.

Australian Wool Industries Secretariat executive director Peter Morgan said movements in the EMI were largely influenced by changes in the US exchange rate.

"The various indicators were relatively unchanged in US currency on Wednesday, but were all down in Australian currency because of the rise in the US exchange rate. The situation reversed on Thursday when the US exchange rate eased," he said.

An Elders spokesman said the wool market appeared to be trying to find a base and move upwards.

However, it was being hampered by relatively slow demand, higher current supply and the usual headwinds of currency fluctuations.

According to Elders, Chinese customers took advantage of lower US dollar prices and purchased some quantities of 19.5 and 21.0 micron types, which contributed to the rise in the market on the final day of selling.

"Demand from China is still described as sluggish; however, spinners and weavers do have some material on hand when the orders arrive and so are beginning to produce their stock accordingly," the Elders spokesperson said.

Elders reported the market was having trouble digesting the sheer volume of high mid-break, tender wool and this was giving rise to the large discounts for such wools in the current spring.

"As the volume of these wools dissipates, so will the discount; however, with the increasing pass-in rates at present, a lot of these wools are still to be sold and so we may not see a meaningful reduction in the high position of break wools until the new year," the report said.

There is a brighter picture for fine wool premiums, which are slowly rising as the clip becomes broader due to a good growing season.

Elders said to date, the increasing premiums have been cyclical and the industry was still desperately hoping for a demand-driven increase in premiums to make it more meaningful.

"This is only likely to occur when the Chinese demand returns to decent levels as the European clients are buying as much fine wool as they need at present, but do not have competition from Chinese or Indian buyers to create more price activity," the Elders spokesman said.

Rodney Norrish of the Angenup Merino stud in Kojonup sold 60 bales of oddments through Elders at the Western Wool Market this week, attracting a top price of $6.68/kg.

He withdrew fleece lines due to the current sluggish performance in the combing wool market and will re-enter when he sees the price trend improving.

In total, Mr Norrish had 440 bales of wool to be sold this season, after shearing 18,000 ewes and lambs over the past month.

He is expecting an average of 19 micron across his wool.

Overall, Mr Norrish has been pleased with the production season, after an early start that led to green feed arriving at least a month earlier than usual.

"It's been one of our best seasons, which followed a long dry summer. As a result the wool is more sound than usual and the yield is up by one to 2 per cent," said Mr Norrish, who has been farming sheep since leaving school in 1962.

Mr Norrish rarely has time to attend the Fremantle wool auctions but this year used two shearing teams, which meant shearing was finished in half the time.

Helping to buffer the lacklustre combing wool price is good support from wether lambs, which he recently sold for $73 each via Elders Shipping Markets.

In mid-October, the stud sold 202 rams, averaging $1647, testimony to industry confidence in the Angenup bloodline.

Last week, 45,147 bales were on offer nationally, slightly up on the 44,050 bales in the last sale. Some 14.4 per cent of the offering was passed in. Despite last week's falls, the AWEX EMI finished the month in positive territory, posting a 6 cent increase for October.

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