Market shrugs off high dollar

As the Australian wool market continued to climb, AWEX regional indicators finished 3.9 per cent higher last week, the question remains: will values be sustainable?

In a relatively large weekly offering of 51,522 bales, AWEX’s Eastern Market Indicator (EMI) rose 41 cents to a two-year high of 990c/kg clean.

The strong market, which had gains across all micron ranges and wool types particularly at the fine end, continued unabated by the rising US exchange rate.

Australian Wool Industries Secretariat Peter Morgan said the EMI had risen by 83c in Australian currency since the past three sales.

“The market is operating independently of the US exchange rate, which rose by 3.1 per cent last week.” Mr Morgan said.

“The US exchange rate rose above 99c following the 0.25 per cent lift in the official Australian interest rate announced during that week.”

The latest export data from the Australian Bureau of Statistics (ABS) points to increased demand from Europe and Italy as the major driver for current market values.

According to the ABS, in the first three months of the new financial year India has moved from 7.8 per cent for all of last season to 10.6 per cent this season.

Italy has moved from 2.8 per cent to 5.3 per cent or 2.3 million kg/greasy, the largest increase for any one nation.

The Czech Republic has moved from 3.4 per cent to 4.6 per cent, while China has adjusted from 78.1 per cent to 68.6 per cent.

Wool economist Chris Wilcox, who is the executive director of The National Council of Wool Selling Brokers of Australia, said the increases in exports to Europe were encouraging.

“There has been a doubling in exports to both Italy and Czech Republic, which has lifted Europe by 113 per cent in value terms and 77 per cent in volume terms, ” Mr Wilcox said.

“The key for wool prices for the remainder of the season will be how confident consumers in the major wool consuming countries in the northern hemisphere feel.

“Will they spend into the important autumn/winter season?”

Mr Wilcox said about 60 per cent of the annual wool consumption in those countries (China, United States, Japan, UK, Germany, Italy, France and South Korea) was purchased in the months between October and January.

“Strong purchases in the coming months will help orders through the wool textile pipeline, ” he said.

“While unemployment in Europe and the US remains high, consumers are feeling more confident about the future, thinking the worst of the debt crisis is over.”

He said current stocks in the pipeline were reported to be low, which was fuelling auction demand. “AWTA test statistics for July to October were down by 7.3 per cent in number of bales tested which would have worried buyers about wool supply.”