WOOL prices corrected down this week as buyers juggled the influence of a higher $A-US and extra wool on the market just three weeks off Christmas.

AWEX senior market analyst Lionel Plunkett said the spike in the market over the previous few weeks resulted in a surge of wool onto the market – an extra 4103 bales to a weekly total of 53,248 bales, the highest since January.

He said five-year high for the AWEX-EMI achieved last week was short-lived with an abrupt drop in prices from the opening lot. The EMI finished the week 29 cents lower on 1349c/kg clean, with the $A-US exchange rate at 75.03 cents and the EMI in $US terms down 9 cents to 1012c/kg. Brokers passed in 12.6 percent of the offering.

Mr Plunkett said Melbourne sold in isolation on Tuesday and provided a bleak outlook for the week when prices tumbled 30 to 60 cents.

“Selected low cvh lots attracted most of the reduced support whilst off-types and lots out of specification were neglected.

“The other two selling centres followed suit on Wednesday when they came online, however Melbourne was more optimistic and showed a firming tendency and less volatility,” he said.

On Thursday, prices continued to improve and consolidate on the previous day’s levels, increasing by 10 cents.

“The firm finish gave a positive signal to an otherwise negative week where Merino fleece prices finished generally 30 to 50 cents lower.”

Mr Plunkett said the skirting market again mirrored the fleece, with large falls on the opening day followed by consolidation and then a rebounding market at the close.

“Despite the positive end to the sale, prices were still reduced by 20 to 40 cents when compared to the previous week.”

Mr Plunkett said the largest crossbred offering since January defied the soft market noted in other sectors and finished the sale dearer for the 28 to 32-micron range.

“Oddments also fell on the first day and then rebounded during the following selling days finishing 10 cents lower for the week.”

Price resistance from overseas mills

The Australian Wool Innovation market report said after weeks of rapidly improving levels, the weakish market tone at the conclusion to last week was added to by price resistance from overseas mills early in the week.

AWI said the stronger $A had all buyers in a negative frame of mind as well and price falls were exaggerated.

“Some stronger indent buying emerged mid-week, which allowed the resumption of ‘normal’ competition and restored the confidence of purchasers.

“As prices settled, new business was forthcoming and the market moved back to a positive tendency,” AWI said.

AWI said Chinese activity was again the leader in market direction, although the week was dominated more so by wool traders, Chinese and local.

“Traders took advantage of the lower prices available early in the week as the larger indent buyers sat out to reassess their buy in levels.

“The greater than expected rostered volumes to sell in the last two weeks before Christmas recess had indent buyers second-guessing their strategy, but after witnessing the top traders gathering quantity at ‘cheaper’ levels, they quickly re-joined the market, even though the $A-US (exchange rate) was over 1pc to their disadvantage compared to the previous sale,” AWI said.

Indent companies buy wool at spot prices at auction for overseas mills and customers, generally for prompt shipment.

Poorer Merino types most-affected by price correction

AWI said the trend revealed at the end of last week continued, with the most-affected types again being Merinos at the lower end.

“The best specified wools of 18.5 micron and finer finished the week at similar levels to the previous close, although they were at one stage 30 to 40 cheaper as well.

“Even though the published MPG of these microns show 30-cent lower levels, most of this is made up of the lower wools being 50 to 60 cents cheaper,” AWI said.

“In addition, the average price of the better wools is included, not the price level at the close of selling.”

The appreciation of crossbred types broader than 27 micron by 20-25c/kg clean came as a surprise to most participants, as a significant volume of these wools are hitting the market and are the major contributing factor for the 20pc increase in auction volumes, AWI said.

AWI said the next week’s offering of 56,122 bales would test the resolve of the market.

“Given the erratic nature of this week’s auctions all outcomes should be considered possible, but the decisive price turn to the positive combined with the strong conclusion on Thursday, leads us to be optimistic of a good market to send us to the annual three week Christmas recess.”

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.