March a testing month for the wool market

Press, 19 April 1985, Page 22

March a testing month for the wool market

A high degree of uncertainty in the market coupled with heavy financial pressure on traders made March a testing month for the New Zealand wool market, according to the Wool Board. Volatile domestic and international exchange rates, a belief that the New Zealand dollar is “over valued” (vis-a-vis the U.S. dollar as the principal wool trading currency) and high short-term interest rates meant the trade were reluctant to build up stocks.

This situation altered later in the month however when the combined effects of a shortfall in new clip offerings and a general freeing up of funds combined to increase buying pressure on the market.

Offerings of new clip wool for March were drawn from all producing areas. Lambs wool and a small quantity of the first of the new season’s autumn short second shear provided traders with a quantity of good and good/average colour scouring wools. How-

ever, the general standard of the mature fleece and spring shorn second shear was. disappointing with staple weakness, cotting and/or discorlouration making them less desirable from a manufacturing point of view. Restricted demand characterised sales early in March with significant price falls recorded in the first half of the month.

Prices for good and good/ average style fleece were largely sustained by Wool Board support, while’ values for second shear, ordinary style and a range of odd’ments declined by 2.5 to 5 per cent. The shortest and poorest type wools were most affected. The 31 micron and coarser lambs shed between 15 and 40 cents clean a kilogram.

The firmer market trend later in the month saw the market indicator lift from its low point for 1985 of 366 cents greasy (491 cents clean) on March 15 to rest on 373 cents greasy (500 cents clean) at the end of the month.

The shortfall in new clip offerings which led to can-

cellation of a combined Auckland, Wanganui and Wellington sale on March 28 coupled with a general easing of financial pressure on the trade were responsible for the higher prices. At the end of March, total new clip aution disposals for the season were just over 1,433,000 bales, transacted at a provisional average value of 377.27 cents greasy a kg. Competition was relatively restricted early in the month with buyers only seeking to cover immediate orders. Later in the month, competition became more widespread with strong demand from Western Europe. The uncertainty of the market early in the month saw Wool Board activity concentrated on sustaining prices for mainstream types. The level of support required from the board gradually declined as the month progressed and demand firmed. Under intervention and strata price control, the Wool Board bid on between 12 and 57 per cent of the total catalogue. At Invercargill on March 1 its pur-

chases reached 5048 bales (27 per cent). During the month the board bid on 64,593 bales (31.52 per cent) finally purchasing 26,385 bales (12.88 per cent) of the offerings. The board sold 3,051 bales of its own stock during this period, which coupled with its new purchases increased stocks to 69,988 bales at the end of March, down by 24,063 bales (24 per cent) from stocks at the start of the season.

In Australia the improved international demand for fine wools coupled with a substantial devaluation of the Australian dollar against the currencies of its leading customers saw strong, widespread buying from all sectors led by Japan.

The market continued to strengthen throughout March before closing on a softer note prior to the Easter break. From a seasonal high of Austs6s cents a kg clean on March 26, the market indicator shed 6 cents to rest on Austss9 cents clean at the end of the .month.

' Prices for 20-22 micron fleece and finer improved by up to 7.5 per cent in the first three weeks of March with prices for coarser qualities also increasing slightly. A downward trend late in the month however, saw prices for 20 micron and finer shed their initial 10 to 20 cent improvement and 22 to 24 micron sold in buyers’s favour.

Reflecting the general strength in the market, Australian Wool Corporation intervention buying dropped to low levels. Simultaneously demand for their stocks broadened to cover a wide range of types. As a result A.W.C. stocks of merino fleece were steedily reduced and at the end of March total holdings amounted to 1,286,000 bales.