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Australian wool auction prices continue to slide

Sheep Central, September 30, 2022

THE Australian wool market continued its downward slide this week — its fifth consecutive weekly overall loss at auctions — despite a devalued currency and support from China’s largest top maker.

The Australian Wool Exchange said the market decline was again driven by falls in Merino fleece types, particularly in wool 19 micron and finer.

The AWEX Eastern Market Indicator dropped by 24 cents, or down 1.9 percent, to 1255 cents/kg clean, with brokers passing in 16pc of the 28,144 bales offered despite this being 9469 bales fewer than last week.

“The EMI has now extended its run of weeks without an increase to 11, the last time the EMI recorded an increase was back in Week 51 of the previous season (22nd of June).

“The EMI has fallen by 219 cents over this period, a 14.9pc reduction.”

AWEX said a sharp drop in the Australian dollar compared to the US currency was not enough to prevent the market falling.

“The AUD dropped by 1.99 cents since the close of last week, to US64.74 cents.

“The majority of Australian wool is traded in US dollars, meaning that purchases for overseas customers were significantly cheaper,” AWEX said.

“Despite this the market still fell and the overall loss in US dollar terms was larger.

“The EMI lost US41 cents for the series, closing at US812 cents, a 4.8pc reduction.”

AWEX said this is the lowest point the USD EMI has been since October 2020.

“Despite the weak start to the 2022/23 season, when compared to the same time last year the total dollar amount of wool sold at auction is tracking higher.

“This season there has been $555 million of wool sold at auction, an increase of $55 when compared to the corresponding sale of the 2021/22 season,” AWEX said.

“This is due in part to there being 39,261 more bales offered this season.”

AWEX said quantities for next week increase by more than 25pc. Currently, there is expected to be 40,097 bales on offer in Fremantle, Melbourne and Sydney. Selling will remain on Wednesday/Thursday due to a public holiday on Monday in New South Wales.

China’s largest dominates Merino fleece buying – AWI

Australian Wool Innovation trade consultant Scott Carmody said the sharply devalued Australian dollar against the US dollar failed to halt the declining wool prices, but he forex rates available did assist in limiting the falls in AUD.

“In addition to the exchange rates assistance, the vastly lower quantities available of just 28,000 bales this week also helped to avoid even cheaper price levels.

“Whether this was by seller design, indication of fresh wool available or purely due to the continuing wet weather affecting shearing and truck movements for delivery ex-farm remains to be seen,” he said.

“With over 15pc more wool sold to the trade this season already, perhaps the build up of grower’s stocks is minimal, which will be good for eliminating quantity for sale as a major factor determining market prospects when the tide turns.”

Mr Carmody said the degradation of the US dollar wool price indicator is significant and indicative of the slack demand affecting values.

“Exporters report new business is sporadic, specific to type sectors and very limited in volume.

“All segments of the supply chain continue to act with risk-averse strategies,” he said.

“Market support immediately dissipates upon order completion, with little appetite for stocktaking at the greasy stage locally.

“It has been quite a while since the auction market has seen the dominance of just the one company in wool buying,” he said.

“Over 33pc of all Merino fleece sold this week was purchased by China’s largest top maker (Tianyu Wool) as well as that entity accumulating almost 19pc of the skirtings.

“China’s other first stage manufacturers were in supporting roles only as were the top three trader exporters.

“European and Indian orders remain intermittent, and volume limited with European manufacturing space practically non-existent for any new opportunities,” he said.

“The super fine spinners and best top making wools finer than 18 micron destined for the two main Italian cloth makers remain in premium price territory of around 240ac and even more for non-mulesed certified sale lots.

“The purchasing at auction by the key crossbred wool indent operator for China assisted prices remaining firm to slightly better in that area and the same result arose from Australia’s largest woollen manufacturer’s (Michell Wool) activity in the cardings room.,” Mr Carmody said

“As confidence seemingly slips in other areas of the wool trading environment, the owners of the largest amount of machinery globally remain steadfast and supportive in their buying operations.”

Click here to see the latest AWEX Micron Price Guides.

Sources – AWEX, AWI.

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