Impact of China Quota Freeze Less Than Expected

August 3, 2007 -The Australian market, which entered the 2007-2008 season this week, did not react as badly as was feared to the announcement released last week that China had suspended the issuing of new permits for wool imports under its quota system. The Wool Exchange's Eastern Market Indicator closed Thursday at 874 Australian cents per kg, a drop of 5.9 percent (55 cents) on the last sale of the 2006-2007 season on July 5. In U.S. cents, the market fell by 6.3 percent (50 cents), with the Australian dollar remaining at around 85 U.S. cents.

As expected, China was relatively inactive and was believed to be waiting to see how the market reacted to the quota developments. However, analysts say that growers have shown little sign of panic and have pursued an aggressive selling approach. It is clear that there are still remaining allocations to be filled from Chinese buyers. Experts are also keen to point out that in this kind of situation, there is always an initial over-reaction, and there is a feeling that the market is likely to lift over the coming weeks.

Another factor easing concern was the strong European presence at this week's auctions. Meanwhile, concerns continue to grow about the low volume of held wool. The American Sheep Industry Association has been coordinating information with American wool exporters and the U.S. Department of Agriculture's export officials for the past week as China is a large market for U.S. grown wool.
Reprinted in part from The Wool Record Weekly
Staff contact: Rita Kourlis Samuelson, ext. 29

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