Auction market downturn prompts wool withdrawals

Sheep Central, August 20, 2021

AUSTRALIAN Merino and crossbred wool prices fell at auctions this week, despite a rally in later sales, with price falls tempered by large grower withdrawals and smaller offerings in coming weeks.

The Australian Wool Exchange said market has continued to trend downwards, with losses experienced again this week.

“Last week’s market falls discouraged many sellers, pushing the national offering down to 34,425 bales.

“From the outset, it was again immediately apparent that the market was tracking downward, further denting buyer confidence, pushing prices lower,” AWEX said.

“The price reductions were mainly felt on the first day of selling.

“The individual merino fleece Micron Price Guides (MPGs) dropped by 20 to 102 cents for the day.”

AWEX said the Fremantle auctions only required the one day of selling as only 4088 bales were on offer for the week, after 58.2 percent of the offering was passed in. Only 1707 bales were sold, the lowest weekly sold figure since AWEX records began (1997/98).

“The AWEX Eastern Market Indicator (EMI) lost 40 cents for the day.

“These large falls prompted many sellers to withdraw their wool from the second day, pushing the second day offering well below expected quantities, this combined with a high passed in rate –24.2pc nationally for the day — reduced supply, prompting an increased buyer demand on the wool that remained,” AWEX said.

“As a result, the market steadied.

“The movements in the MPGs in Sydney and Melbourne ranged between -10 and +20 cents.”

AWEX said the EMI finished the day 3 cents higher, but lost 37 cents for the week, closing at 1335c/kg clean, a fall of 2.7pc.

“As the Australian dollar also tracked downward — the A$ lost a full US cent when compared to last week – and the loss in US$ terms was US55 cents or 4pc.

“As there is traditionally not a lot of shearing occurring in the West at this time of year, next week is a non-sale week in Fremantle,” AWEX said.

“This fact, combined with the fall in prices in this series, has pushed the national offering lower. 32,337 bales are currently on offer, with only Sydney and Melbourne in operation.

Italian competition a feature – AWI

Australian Wool innovation trade consultant Scott Carmody said price falls across the entire offering featured again at the start of auctions, but a consolidation and some small gains during the final day’s selling provided a more positive finish.

“Bales withdrawn before selling commenced accounted for 15pc of the original rostered quantities.

“Sale results subsequently had over 28pc of wool eventually offered not meeting seller expectations,” he said.

“Therefore price and volume risk of 43pc of the offering failed to transfer through to the exporters/buyers custody.”

Mr Carmody said the Western Market Indicator fell 55 cents lower to 1351c/kg clean, with just a one day sale staged. In WA, 57pc of wool offered was passed in and more than 67pc of the Merino fleece failed to meet reserves.

“Overseas users were again assisted by a weaker Australian dollar as Australian share markets followed the US markets down and iron ore prices continue to trend to the downside.

“In US$ terms, the wool price falls were heavier at 4.1pc or US41 cents, which had the US$ EMI closing at US969c/kg clean.

“Both the CNY and Euro price equivalents suffered similar magnitude of losses.”

Mr Carmody said the failure of substantive new business to emerge through the end of last week, over the weekend and early this week, caused buyers to carry the already negative purchasing sentiment through to this week’s auction start.

“Some small volumes were conducted overnight Tuesday, albeit reportedly at low levels under the market, and this appeared to underpin the Wednesday selling program.

“Heavy grower withdrawals and high passed in percentages also prevented further price degradation for the moment,” he said.

“Some strong buying from Italy was a significant factor this week as one of the two companies of that nation hit near the top of national buyers’ lists.

“That company has now purchased 38.7pc of what they purchased at auction for the entirety of last season after just four weeks of sales this season.”

Mr Carmody said the largest Australian trader exporter and China’s largest top maker lead the buying lists, with just subdued support from other traders, processors and indent operators.


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