Auction wool prices hold firm in face of currency changes

Sheep Central, January 27, 2023

Elders district wool manager Mal Nicholls, left, with Jackie and Kelvin Pendergast, Pip Claringbold and Clint Pendergast at the Melbourne wool store last week.

WOOL prices held relatively firm and lifted for some finer fleece types at auctions across Australia this week.

The Australian Wool Exchange said after opening the 2023 calendar year with two consecutive rises, the minor drop in the AWEX Eastern Market Indicator (EMI) of 3 cents to 1308 cents/kg clean could be largely contributed to currency movement.

“Since the close of the previous series the Australian dollar has gained US1.95 cents.

“As the majority of Australian wool is traded in USD, so this movement had a noticeable impact on the market,” AWEX said.

“This was reflected in the movement of the EMI in USD terms, the EMI added US24 cents, a healthy 2.6pc increase.

“Good style types, particularly those with favourable additional measurement results, attracted the strongest buyer attention.”

AWEX said this strong demand meant these types recorded very little change when compared to the previous series.

“In fact, some finer Merino Price Guides (MPGs) recorded overall increases. Most noticeable for 18.5 micron and finer in Melbourne, where the MPGs gained between 6 and 15 cents.

“Specialty non-mulesed wool continued to be highly sought after and attracted large premiums over mulesed types with similar specifications,” AWEX said.

“Lesser styles wool and wool with poor additional measurement results were not as well supported as the better types and were highly irregular.

“These wools accounted for many of the over 13.2pc of wool that was passed in,” AWEX said.

“This figure was 7.5pc higher than the previous series.”

AWEX said the skirting market followed a similar path to the fleece, with good style low vegetable matter (vm) types receiving strong support and recording very little change. Lesser style wool and higher vm lots did not have the same level of interest and were highly irregular, trending downward.

Better times coming, but with caveats?

Australian Wool Innovation trade consultant Scott Carmody said prices at Australian wool auctions had held up for the third consecutive week.

“This is despite the pressures of the much stronger Australian dollar against the US dollar and other currency pairs used in the trading and purchase of wool.

“Slightly weaker levels in AUD were seen at the Western centre, but largely due to the 2pc + adverse forex, rather than a weakening of the current steady demand from overseas,” he said.

“Prior to the sales commencing this week, the largest wool destination in China had settled into their Lunar New Year celebrations.

“Replies to offers from local traders were quiet and cautious in activity as per the normal operations every year,” Mr Carmody said.

“Some new business was written before they took the holiday, with many exporters considering this a small hedge against potential price and currency rises in the immediate future, which indeed happened on the forex, making those “insurance” contracts worthwhile short term as one prominent exporter described.”

Mr Carmody said the trade is quite buoyant at the moment and a positive sentiment has been ruling for the past two months.

“Good steady enquiry with a generally firm market is a scenario not seen for a while and both sides of the trade are seemingly enjoying this stability.

“In fact, many participants at the first exchange of ownership part of the trade are hinting at better prospects for wool, but with the usual caveats,” he said.

“Sitting high on this list is the willingness of factory workers in China to return to work following their New Year holidays.

“After most workers visited their home provinces for the first time in many years, some may choose to alter career paths,” Mr Carmody said.

“The western world saw many changes after lockdowns ended in their countries, so it is somewhat expected a degree of change will also occur, affecting mainly the eastern China seaboard located mills.”

Mr Carmody said the big traders and first stage processors dominated buying.

Next week’s offering is expected to reduced, with 42,936 bales currently catalogued for sale on Tuesday and Wednesday.

Pendergasts were happy with their prices

The Pendergasts from Benambra were happy with their wool sale results in Melbourne last week, with most lines selling on average 100cents/kg above valuation through Elders.

This included 16.7 lambs wool sold for 1792c/kg to Techwool. It had a yield of 74.3 percent, tensile strength of 45 Newtons/kilotex and 0.1pc vegetable matter content. Mr Pendergast estimated these lambs would cut just under four kilograms unskirted for five months growth.

The 17.2 micron weaner wool sold 1710c/kg to Endeavour Wool Exports. It yielded 76pc, with a tensile strength of 44N/kt and 0.2pc VM. Mr Pendergast estimated they averaged about 5.75kgs for 10 months growth. The adult fleece sold up to 1501c/kg.

Mr Pendergast said there was a positive outlook at the auctions, with some expectation the market could get strong into February.

Sources – AWEX and AWI.


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