Producers walking fine line amid volatility

The Australia Day public holiday restricted wool sales last week and the limited offering gave way to a more stable market for the third week into 2012.

Last Tuesday's sales opener lifted the Eastern Market Indicator (EMI) by 2 cents in Australian currency and by 13c in US, according to Australian Wool Industries Secretariat Peter Morgan.

Dr Morgan said the AWEX Regional Indicators finished 0.5 per cent higher when the US exchange rate rose by a further 1.1 per cent.

"The exchange rate rose above 106c on Thursday night, based on expectations of continuing low interest rates in the US," he said.

"The continued appreciation of the US exchange rate means that the EMI is up by 78c since the sale prior to Christmas, whereas the increase in Australian currency is a modest 5c over the same period."

AWEX said the bulk of the 44,751 bale offering was in the mid-micron range, which had mixed results depending on the selling centre.

"Sydney gained a few cents and Melbourne was mostly unchanged, while Fremantle gained 10 cents at its one-day sale on Wednesday," AWEX said.

"The very fine edge (16 microns) was up to 50 cents dearer, while the broader types were 20 to 40 cents higher, both on reasonably limited offering."

The Landmark Wool Weekly Report said Fremantle's sale was solid with fine wools well supported and 18 and 20 micron categories gaining 5c, while other broader types lifted from 10 to 15c.

"The Western Market Indicator was quoted 8c higher to 1204c/kg clean," Landmark said.

Three generations of the Norton family, of Redmond, were at the Fremantle sale to watch their McMurray/Chorkerup wool clip go up for auction.

A four-bale line of 15.9 microns sold for 1450c/kg - the second top-price for the Western Market.

Chris Norton said his father, Eric, started producing fine wool 50 years ago and today they run The Grange bloodlines. "Our flock of 600 breeding ewes produces an average of 16.5 microns," Mr Norton said.

Also making the best of the market conditions were Roger and Maree Bilney's 10 bale line of 15.6 microns Lana-Serica wool, which topped Fremantle at 1539c/kg greasy.

The Kojonup woolgrowers, who farm with their sons Adrian, Matthew and Bradley, run 6500 breeding ewes, some of which were acquired from Robert Fry's superfine flock.

The Bilneys breed their own rams using artificial insemination from Lorelmo and Cromarty eastern states bloodlines, but may be looking for a change.

"Superfine sheep, although easy to run, are no more profitable than an 18 microns flock," Mr Bilney said.

Being mindful of body size, Mr Bilney is considering adding an infusion of Poll genetics from potential WA studs.

"We may be in the market this year with the help of the Sire Evaluation Program," he said.

The National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said the price competitiveness of wool lay in the substitution guidelines as applied to finer and broader wools.

"Technology advances in both synthetic and cotton have helped to increase the substitutability of these fibres with wool, especially the broader micron types," Mr Wilcox said.

"For 19 microns, the story has changed over the past 10 years and substitution now applies for lower microns."

Mr Wilcox said one factor that would influence the market in the coming months was that 21 microns wool had become quite expensive against both synthetic and cotton.

Meanwhile, Australian Wool Innovation and Woolmark licensees have reported strong interest in broader wool products at Heimtextil, in Frankfurt Germany, the world's largest trade fair for home textiles.

This week, wool volumes will drop below 40,000 bales at national sales and Fremantle will again conclude with a one-day sale.