Farmers wary of volatile market

23 Jan, 2002 10:00 PM
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TO SEll or not to sell?

That is the question on many woolgrowers' minds as the post wool stockpile era continues to impact, with mid and broad micron wool prices breaking through old reserve price scheme barriers.

Some growers have made the decision to sell their wool, with this week's estimated 24,000 bale offering (after a cancelled sale due to lack of supplies) now revised up to 29,000 bales.

Nationally, 85,000 bales were offered this week.

Next week's WA sale, which was being considered for cancellation due to lack of supply, now has an estimated 16,000 bales on offer.

Elders WA wool marking manager Ken Walker said prices were already coming off slightly on Tuesday in the eastern States, which was predicted because of the larger amount of wool being offered for sale.

He believed WA wool prices would be sustained around the 780c/kg mark, where the Western Micron Indicator finished two weeks ago.

He said wool finer than 19 microns had recovered to within 25 per cent of where it was one year ago.

Mr Walker said notwithstanding market volatility, last year's highs for finer than 19-micron wool should be reached.

He said it was up to each farmer whether or not he or she decided to put wool on the market, however, the current wool prices were above cost of production.

"There is nothing wrong with this money," he said.

"It's a gamble herein because of the volatility."

Wesfarmers Landmark WA wool manager Ron Myers said WA prices across the board should remain at recent sale levels - with some corrections.

"There is no doubt the perceived shortage of wool is driving the market which is also without major participation of the Chinese buyers," he said.

He said the company's electronic wool selling had increased dramatically, but believed auction prices would still determine the market when underpinned by futures.

Mr Myers would not be drawn on whether woolgrowers should sell now but believed it was better for farmers to become involved in the futures market to reduce the volatility.

"Generally speaking farmers need to get more involved in price risk management," he said.

He said the latest message from Italian wool processors was that they had been doing well and were reinvesting in new machinery.

Primaries of WA managing director Des Sheedy said the major point arising from the price increases since Christmas, was that early stage processors were not carrying stocks of wool and needed to buy it on a continuing basis.

"They need to keep their machines going and protect their investment," he said.

He said the reduced wool production had finally hit home to wool customers.

Mr Sheedy said prices were up 40pc on last season without the Chinese. He said Chinese quotas could be released later this month or early February.

"My view is that the market is headed north with some corrections along the way," he said.

Mr Sheedy said it could be a good time for woolgrowers, in consultation with wool advisors, to study the profile of their clip and sell the best part.

He said considering all the factors of the market place, the market should remain strong, notwithstanding the unforeseen.

"Some insurance is well worth taking," he said.

Mr Sheedy said that since the launch of their Wooltrade electronic selling system two weeks ago, they had sold 5000 bales across four States.

Meanwhile, WAFarmers was calling on buyers to offer a competitive price for wool in order to prevent a further supply shortage and downsizing of the wool industry.

"With the ever increasing demand for meat, and prices continuing to increase, it is easy to see why there is a trend developing where growers are opting for meat production rather than wool," WAFarmers wool section president Dale Park said.

"Gone are the days when just about every farmer had sheep for wool production.

"Growers are becoming astute business people who will produce a product that will give them the best rate of return."

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