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Wool prices surge to new record peak as on-farm storages empty

by Sheep Central, 17 March 2017

FINE wool prices surged by up to 100 cents-plus in auction this week as the Australian market continued its bull run.

Clips continued to come out of on-farm and broker storages and brokers advised against woolgrowers shearing too early to capture the high prices, as the AWEX Eastern Market Indicator rose by 26 cents to a new historical peak of 1546c/kg clean this week.

The market lifted despite the $A-US exchange rate rising 1.61 cents to US76.85 cents, putting the EMI in US$ terms at 1188c/kg, up 43 cents. Brokers passed in 6.7 percent of the 42,732 bale offering.

AWEX senior market analyst Lionel Plunkett said finer microns again experienced the most significant price movements, in particular 18.5 micron and finer clips which enjoyed gains of between 60 and 100 cents.

“The record prices have gradually brought previously unwilling sellers to market, pushing the amount of wool being held in brokers’ stores to historical lows.

“The lack of wool on hold has severely limited any large increases in weekly quantities, enabling the market to gradually rise without any extra supply pressure and this sale was no exception,” he said.

Mr Plunkett said with clearance rates consistently in the 90 percentile region the amount of wool on hold will continue to stay at these levels.

Toward the end of the last selling day, the Fremantle market showed softening signs in the 20.5 micron and coarser range, with some types coming back up to 25 cents, he said. But the large price movements in the finer microns continue to widen the micron price differentials, with the price difference between an 18 and a 21 microns now out to nearly 700 cents.

“The skirting market closely mirrored the fleece, general gains across the board but the largest rises were experienced in the finer microns, in particular 18.5 micron and finer which in some cases rose by over 100 cents for the week<” Mr Plunkett said.

The crossbred market again performed well, although major price lifts were centred on the 25-26 micron range, which were generally 10-30 cents dearer. Other descriptions were unchanged.

Mr Plunkett said the oddment market struggled to maintain its current high levels and generally lost 5 to 15 cents for the week, with finer better types least affected.

Top results as wool clears store and on-farm storage

Rodwells wool manager Michael de Kleuver said the market repeated the same pattern of the last few months, with fine wool selling dearer.

“And the finer you go the better it gets.

“Wool shorn in the spring and not containing the vm was really, really keenly sought after,” he said.

“Medium wool about the same mark, and increasing amounts of vm which was getting harder to manage, but fine wool onwards and upwards.”

Mr de Kleuver said a client this week sold 61 bales of Merino fleece, pieces, bellies and stain, plus a bale of dags, for $160,000, or $2623 a bale. A South Australian client with 78 bales with “everything in it”, including pieces with a high vegetable matter content in the pieces, grossed $132,000 or $1690 a bale.

Mr de Kleuver said some growers were considering shearing earlier in reaction to the prices.

“But if every single person does it, we will have an abundance of short wool and not enough long wool.

“You will probably find that the long wools will get a premium and the short wools will be discounted,” he said.

“I can see some people shearing some sale sheep at eight or 10 months and I wouldn’t think that was a bad idea at all.”

But Mr de Kleuver said there would be no discount for wool above 65mm, but advised against shearing at lengths of 40-50mm.

“Although we sold some of those today and they were extraordinarily price.

“It doesn’t matter what it is, particularly the finer you go, the better it gets.”

Mr de Kleuver said the flow of wool from storage would come to an end “in the not too distant future.”

“We’ve actually got less fine wool around us than we’ve ever had.

“We’ve got a few crossbred clips that we’ve been holding since that real dip in January-February, but when the volume of crossbred runs out in the 2-5 weeks they will come on the market and get sold this financial year,” he said.

“There’s definitely no wool on farm and it’s definitely coming out of hold.

“How do you resist these sort of prices?” he asked.

“I think give it another month at 42,000-43,000 bales a week and things are going to be very much hand to mouth.

“In other words, whatever gets shorn this week will turn up on the market a fortnight later, and it will be like that, I would have thought, right through till September.”

Price rise defies strong dollar

The Australian Wool Innovation weekly market report said strong price gains were achieved for most of the wool this week as the market defied the unexpectedly stronger $A against most of the major trading currencies.

“What is starkly apparent in the wool market at present is that demand is far outstripping supply, particularly in the superfine merino types.

“Australia is producing approximately 3pc more wool than last year and over 6pc more first-hand wool has been offered so far at auction this year,” AWI said.

“Obviously supply, or lack of supply as incorrectly stated by many and is clearly not the driver of this market.

“Additionally, this season we have produced 4.6pc more wool finer than 23 micron compared to the same time last season and we have seen the price increase substantially,” the report said.

“Conversely, and ending the “supply is the driver” thought, is that we have produced 4.1pc less wool broader than 24 micron and unfortunately we have seen price decrease significantly for these wools.”

AWI said demand for Merino wool has been building for years.

“Many in the industry cite the growing use of wool against the skin in sports and outdoor wear as a strong influencer in this growth.

“This is evidenced with the comparatively strong prices paid for the skirting types over the past seasons.”

Other factors are the improved diversity of products that wool is now used in, the general improvement in business conditions and increasingly discerning consumers, AWI said.

“The surge in levels since the Christmas recess has come about due to the buying interest from mainly India and Italy.

“Buying from these countries has been competing strongly with China and coincides when most manufacturers stock levels of raw material is at all-time lows.”

AWI said all wool users are reporting a steady and rising interest in Australian wool.

“The very public moves six months ago to finer microns for the Chinese government railway and school uniforms orders has no doubt assisted demand for the long wool super fine sector.

Next week more than 51,000 bales will be offered in Sydney, Melbourne and Fremantle.

Sources: AWEX, AWI, Rodwells.

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