MERINO wool prices dropped on average this week as buyers came to terms with fleece with high vegetable matter content and more prematurely shorn clips in a smaller offering.
The AWEX Eastern Market Indicator fell 10 cents to close on 1534c/kg clean, despite a lower $A-US exchange rate and the EMI in $US terms dropping 19 cents to US1127 cents. Growers passed in 16.1 percent of the 38,028-bale offering.
Crossbred and carding wool prices held firm to dearer, but Merino fleece indicators slipped by up to 70 cents clean at auctions across Australia.
However, brokers said large numbers of growers have shorn sheep earlier than usual – at 6-9 months growth – to catch the recent higher prices. This wool will therefore not be available at its usual offering time, potentially creating a forward wool shortage and putting upward pressure on prices.
High vm wools the biggest losers
Fox & Lillie Rural brokerage manager Eamon Timms said the most obvious losers this week were the heavy vm content types in the medium Merino clips.
“This issue is that there is such a big selection of those clips, that the market is having trouble absorbing all those wools.
“If you talk about finer wools, low vm and better spec, there is not a problem in the world.”
Mr Timms said medium Merino wools with less than 1 percent vm content also were not as affected as the lines with 1.5pc-plus vm fault.
“There is more cott, burr, colour in the selection at the moment – the selection has deteriorated and the better wools are certainly much more supported.”
Traders are also finding it difficult to trade wool with higher levels of fault at the moment.
High vm wools hard to sell
Australian Wool Network auctioneer Kelvin Shelley said some medium Merino wool clips this week had vegetable matter or vm contents of up to 13-14 percent.
“They were hard enough to sell those types, but if you bought them back to 5-6pc there was still a lot of competition earlier in the week, which was good.
Mr Shelley said the market opened well in Melbourne on Tuesday, but the market dropped sharply – 20-30 cents — when Fremantle started selling on Wednesday, as the Melbourne and Sydney auctions followed this trend.
He said the combination of high volumes of high vm and prematurely-shorn wools was influencing market demand and prices.
Mr Shelley said lower vm content wools were very to find and he expected prices for these would improve.
“We’ve had so many people shearing for the last three months, if sheep had 60 mm on their back they said let’s try to catch the market.
“If they had 8-9 month of wool on them at 75mm, instead of crutching those sheep they have shorn them to try to catch the market as well,” he said.
“We won’t see those wools in the next few months, when we should have, we won’t see those until October-November-December, into early next year.”
Sales opened solidly in eastern states
AWEX senior market analyst Lionel Plunkett said on the first day of selling this week, the market opened very solidly in the eastern states, with most types and descriptions selling at levels at or above those achieved at the previous sale.
“Buyer confidence remained high through to the final lot.
“Prices generally increased by 5 to 10 cents for the day, pushing the benchmark Eastern Market Indicator up 5 cents to 1549 cents.”
He said the Fremantle market opened solidly and in line with the eastern markets, then slowly but noticeably deteriorated as the sale progressed.
“The Western Indicator dropped 14 cents as most types and descriptions were discounted between 10 and 30 cents.
“The tone evident towards the end of the first day, was apparent from the beginning of the second.”
Mr Plunkett said low-yielding, lesser style/spec wools were hardest hit, as prices were generally reduced by 15 to 30 cents.
The skirting market was strongly influenced by vegetable matter, with wools with less than 3pc vm highly sought after and finishing the week relatively unchanged.
“Skirtings with higher vm levels struggled and these types had price decreases of between 20 and 40 cents, with wools 6pc vm and over most-affected.”
Mr Plunkett said the crossbred sector was resilient in the falling market, with most types and descriptions recording modest rises for the week, generally between 5 and 10 cents.
“The oddment market had two solid selling days with most types and descriptions tending slightly dearer for the week, resulting in the three carding indicators rising by an average 7 cents.”
Good support for better style, length and low vm
All commentators this week said there was good support for better style and strength fleece and skirtings, especially wools carrying a low percentage of vegetable matter.
The Schneider Group market report this week said buyers were selective, targeting the better wools and discounting the lower style, poor specification wools and in particular any lots carrying more than 1.3pc vm. The report said the average vm content in the Sydney fleece catalogue was 2.7pc and it was 2.2pc in Melbourne. This is not suitable for many buyers. Wool tops must be clean and a certain type and percentage of VM is difficult to remove, the report said.
There are currently 36,343 bales rostered for sale in Sydney, Melbourne and Fremantle next week.
Click here for the latest AWEX Micron Price Guides.
Sources: AWEX, Fox & Lillie Rural, AWN.