THE surging Australian dollar is good news for those planning a trip overseas, but it can lead to a

06 Dec, 2006 08:45 PM

Greasy wool markets main-tained at relatively stable levels last week and defied traditional falling trends when the dollar was high, despite near-record offerings in the wool selling rooms last month.

In late October and early November, national market indicators even managed to climb in consecutive weekly increases not seen in two years.

But Australian Wool Services (AWS) chief economist Chris Wilcox warned the high dollar value could force some processors to look at wool blends, using cheaper synthetic or cotton material.

³In current US dollar terms, medium type Merino wool is already seeing a high price compared to cotton,² he said. ³It has also lifted sharply compared to synthetic fibre prices.²

Mr Wilcox said the limited supply of wool in the processing pipeline and strength of current demand had so far held up wool prices, despite the rise in currency value.

³Prior to 2003, the exchange rate didn¹t have much of an impact in terms of prices paid in Australian dollars,² he said.

³Between 2003 and 2005 that correlation was high largely because we were in a market where demand was soft.

³We are now seeing a situation where demand throughout the textile pipeline is quite strong.

³Even though the Australian dollar is rising against the US dollar, we are not seeing the impact that we might have seen 12 months ago.²

The grain market has not escaped the effect of the boo-ming dollar, even though many wheatgrowers in WA remain undecided on how their crops will be sold in the wake of the Cole inquiry investigation into AWB¹s kickbacks paid to Saddam Hussein¹s regime.

Grain handler and marketer Co-operative Bulk Handling (CBH) revised its wheat pool estimated equity last week as a result of the dollar¹s rally.

The pool was downgraded by $5/t to $260-$270/t when the dollar reached a 20-month high.

But the pool has been favoured by a large percentage of WA growers, who are not yet prepared to commit their grain to the AWB pool.

The pool equity remains dependent on a suitable bulk export licence being granted by AWB. CBH chief executive officer Imre Mencshelyi said AWB¹s decision to veto the CBH licence applications had made it impossible for the company to undertake its usual hedging activities to pro-tect growers against currency fluctuations.

³Given the overwhelming level of support, the CBH Group gave an undertaking that it would work through a range of options as to how it may secure this enhanced val-ue for WA growers,² he said.

³This process is ongoing so it is particularly disappointing that WA growers have been forced to sit back and watch as market conditions erode some of the value that could have been delivered to them.²

Meanwhile, according to Meat and Livestock Australia (MLA) chief market analyst Peter Weeks, the premium red meat market has remained largely unscathed despite the rising Australian currency.

Even when the value pushed past US79c last week, the Japanese market was moving into one of its busiest trade times in the year.

³In most of our markets strong demand and restrained supply has meant the dollar change has been passed on to the customers,² Mr Weeks said.

The Australian dollar has risen mostly against the weakening US dollar, but for some Asian countries the Australian dollar is down on levels compared to last year.

³The dollar value there has actually helped us in places like Indonesia and South Korea,² Mr Weeks said.

³We also compete more on quality and relationships, rather than just on price.²

Lower-quality and cheaper red meat from Brazil and India is heavily influenced by price in the Asian markets.

The domestic red meat processing industry has also reached peaks, with a record 25-year high for lamb slaughters last month.



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