Markets quick to cotton on

Forget the Skyshow, fireworks of a different kind could be on the cards this year

The wool market remained strong last week as Australia Day celebrations prepped an encouraging finish in Fremantle with the prospect of more fireworks to come.

The Western Market Indicator (WMI) lifted on both sale days, according to the Landmark Wool Weekly report.

“The 18 micron wools performed well gaining around 30 cents while Thursday’s strong finish had most WMI categories up 15 to 25c, ” Landmark said.

Fremantle’s closing indicator was 1141 cents per kilogram clean, a sale-to-sale change of +23 cents.

Landmark said the overall national outcome had a settling effect on the volatile few weeks of dramatic declines.

Despite only two days of wool sales, the national offering figure was almost 54,000 bales, including the largest Melbourne two-day series in seven years.

Landmark said that with wool following the price trends of cotton, observations of that commodity may be an important guide to understand the movements of wool prices.

“Cotton recently hit record levels due to most of the northern hemisphere crop being sold on forward contracts, ” it said.

Landmark predicts consumption of cotton is expected to be held back in 2011, because of the high prices resulting from the high demand.

“This is good news for wool, however, if cotton demand slips, it will be a telling sign for wool, ” Landmark said.

It expects cotton production to increase by 15 per cent in 2010-11 with 50 per cent increases in the US and 12 per cent in India.

“China and Pakistan production will decrease and flood damage in Australia will see estimates revised down domestically, ” Landmark said.

In contrast, Landmark said sheep numbers would remain at low levels and combined with increased meat production, wool production would be down, which should support prices.

AWEX said wool buyers have become increasingly discerning and are paying more attention to the better types.

“Best style and 40nkt types are attracting good support over the lower styles for all microns, but this is particularly evident in the finer microns where some Italian influence has manufactured substantial premiums for selected lots, ” AWEX said.

Sales will be held in Sydney, Melbourne and Fremantle this week, when 45,557 bales are currently rostered for sale.