US credit rating cut hits price
As the US credit rating was downgraded last week from AAA, the Australian wool industry suffered its largest weekly fall in 10 months — down 59 per cent in the Eastern Market Indicator (EMI).
The Australian Wool Exchange weekly report said the week began on a poor note with a sharp drop in wool prices mirroring the falls on global financial markets.
In the first sale back after a three-week break, the EMI dipped to 1302 cents/kg clean, from 1361c/kg averaged on the previous sale.
With a build-up of receivables into brokers’ stores over the three-week break, the big 58,531-bale offering was desperate for some stand-out performers.
As the Western Indicator dropped below 1300c/kg to 1291c/kg, buyer resistance skyrocketed to a 28.2 per cent pass-in rate.
In some kindness to the market, Fremantle’s Wednesday opener caught wind of significant gains after the eastern market fell away on Tuesday which was expected, according to Australian Wool Industries Secretariat’s Peter Morgan.
“The market was initially affected by the combination of the worst global financial circumstances since the onset of the GFC, of September 2008, and the large offering, ” Mr Morgan said.
“However, the fall in the exchange rate provided a significant buffer against some falls in wool prices.”
Mr Morgan said the EMI fell by 112c/kg in US currency since the last sale compared with a 59c/kg fall in Australian currency.
Although most of Wednesday’s gains were in non-fleece types, one WA producer, who has kept an all important AAAM rating, was very pleased with his family’s fleece offering.
Kojonup woolgrower Daniel Zadow sold three bales of 14.4 micron fleece wool for a farm record of 1700c/kg greasy.
Mr Zadow, who farms with wife Jacinta and parents Wayne and Peta, said they were concerned before the sale after the shake-up in the financial markets.
“We decided to test the market before selling the balance of the clip, ” he said.
“It’s been a tough four to five years for superfine wool, especially because our sheep cut less than medium micron types. We need to achieve a premium price to make up the difference in cut.”
Mr Zadow said that in a good season they could average 5kg per head.
“But last year’s drought had our cut down around 3.5kg, ” he said.
The Zadows’ Lobethal 1600-hectare farm runs a total of 5000 sheep on 750ha, including 3000 breeding ewes, and they crop 250ha.
Using Misty Hills and Rangeview bloodlines, the annual production of 91 bales averages 16 micron.
Older ewes are joined to Poll Dorset and White Suffolk rams in the farm’s cross-breeding program.
“We are hoping our next allotment of better strength wool will sell for more in this week’s auction, ” Mr Zadow said.
The Lobethal offering was the top-price in the Elders catalogue and the overall highest price at last week’s Western Wool Centre at Bibra Lake.
Technical wool manager Danny Burkett offered 220 fleece lots on Wednesday which he said were part of the pick-up on the losses from the eastern markets the day before.
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