High volume leads to lower wool prices

26 Apr, 2012 10:00 AM
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A BIGGER offering after the Easter break saw the wool market drop back last week when sales resumed.

The AWEX regional indicators finished two per cent lower in Melbourne, Sydney and Fremantle but the softer market was expected due to the size of the offering.

Chinese interest has also eased adding pressure to the market.

However, the Eastern Market Indicator remains at a healthy level in historical terms closing at 1165c/kg which was 160c less than the same week last year.

The greatest falls were in the north which fell by 32c/kg on Wednesday and again by 2c/kg on Thursday.

The Western Market Indicator was also down finishing at 1183c/kg, 85c less than in the same week last year.

The south experienced a jump on Wednesday but dropped by 4c on Thursday to finish at 1144c/kg.

There were 55,594 bales on offer, compared with 49,205 at the previous sale, 15.4pc were passed in comprised of 15.6pc in Sydney, 12.3pc in Melbourne and 21.6pc in Fremantle.

A total of 47,058 bales were cleared to the trade.

Dyson Jones trading director Peter Howie said he hoped there would be market improvement in the next few weeks.

"We are hoping for a better market over the next few weeks as the offering diminishes," he said.

"But considering the sheer quantity and the lack of interest from China the market still performed reasonably well last week."

In light of the glut in the market Spearwood Wool Handlers Rob Thorn said they decided to hold back on their offering and wait for the supply to reduce.

"It was a negative market last week but I think the supply in the coming weeks will stabilise," he said.

"Although we won't see it storming away like it did this time last year it is still set to remain firm with the drop in supply in the coming weeks."

According to Elders wool technical manager Danny Burkett there were a number of factors affecting the current market but supply was the driving force.

He said a similar scenario to last year will play out as sales moved into May.

"Supply will dwindle back to 40,000-bale offerings and while there is a small volume of passed in and withdrawn wools to be pushed back into the mix, as we go on the volume will not be significant enough to make a large impact," he said.

"All in all the fundamentals that drove the market to this point are still in place with the exception of the finer edge, the forward market is showing favourable prices so a strong argument could be formed that the market will continue to trade within this historical high trading range."

Westcoast Wools managing director Luke Grant agreed supply was causing downward pressure on the market but the reluctance of the Chinese was also playing a part.

"The Chinese have experienced trouble selling their top stock and also have their domestic wool clip coming in, which is part of the reason for their lack of activity," he said.

"But the national offering will be smaller next week and moving into the next three weeks which will help the market come back a little."

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