Medium wool prices dropped this week following the trend set by the finer microns. The Eastern Market Indicator (EMI) continued to decline, falling 20 cents to finish at 753c/kg clean. Fine wool prices eased further with the northern 18 Micron Price Guide (MPG) finishing at 1667c/kg clean, a decline of 40 cents (2.3 percent) compared to the previous week. With sales only in the eastern markets, the middle microns also suffered with the southern 23 MPG falling 22 cents to end the week at 676c/kg clean. This softness was also reflected in the southern market indicator, which fell 20 cents for the week to close at 695c/kg clean. There was a relatively high clearance of bales despite the declining prices, with only 12/4 percent passed in out of the 58,563 bales offered. The three top buyers for the week were Michells, Itochu and Krelinger. Sales will be held in Sydney, Melbourne and Fremantle next week with approximately 99,500 bales on offer.

Market outlook

Wool prices fell at auction this week as confidence in the market eroded. Once overseas mills heard that prices were easing, they reduced their orders where possible, further adding to the poor market sentiment. Fine wool in particular continues to struggle, both on futures and in the physical. With apparel demand concerns still predominant in processor decision-making, it was likely that wool prices would fall at some stage, although the extent of the fall in fine wool was not expected. Despite the recent ease in prices, exports are still doing well, with August figures showing a 16 percent increase in volume and 31 percent increase in value over August 2000. The most important export destinations, namely China, Italy and Korea, all increased their imports of Australian wool during August. This represents a positive sign for wool growers, despite the soft short-term outlook. In addition to this, there are signs that some buyers are starting to re-enter the market, with the favourable currency and lower prices creating better buying opportunities.

Prepared by the Wesfarmers Landmark Research and Information Unit. Supplied by Wesfarmers Landmark Daniel Walker Braidwood.