The Australian wool market is likely to be stable at the last sales of the 2003/04 season this week, although a larger offering and movements in the Australian dollar could place pressure on prices, analysts said on Monday.
Last week, the AWEX Eastern Market Indicator made steady gains, rising six cents to end the week at 827 cents a kg clean, following a month of steady gains for wool prices.
"Analysts are anticipating the market conditions of recent weeks to persist into (this) week's sales - the final sales for the 2003/04 season," wool-broker Landmark said.
Landmark said that prices are likely to remain at similar levels to last week. However, they could struggle to maintain those gains with a much larger offering of 53,084 bales rostered for sale this week in Sydney, Melbourne and Fremantle.
A varied catalogue of mainly 21 to 23 micron wools is expected in Sydney, while a good selection of best to good topmaking styles are rostered for sale in Melbourne and Fremantle.
"The market should be wary of the potential of the Australian dollar to rally and the impact of plummeting cotton prices," Landmark said. The Australian dollar is currently resting just under the 70 US cent level, after spending much of last week hovering around the 69 US cent mark.
The US cotton price has plummeted in recent months, falling by 42 percent in value since November 2003, and 25 percent in the past month, Landmark said.
"This could have the potential to undermine wool prices, giving processors the ability to increase blends with cheaper fibre alternatives," the wool-broker said.
This also could have a significant impact on futures markets. At present, wool futures have been making steady gains, although there has been some evidence of an impending downturn in the market.
"Wool futures markets continue to indicate this slowdown and we've seen little change in forward prices over the last week," Landmark said.
However, the long term outlook continues to be strong, with good premiums and increased interest expected through to mid-2005, it said. AWEX reported a total of 597,573 unsold bales held in store as of May 7, 2004.