Australian wool auction prices lift then steady

Sheep Central, November 1, 2019

A lift in wool prices this week might not be sustained. Image – AWEX.

AUSTRALIAN wool prices rose again in auctions mid-week, but steadied quickly toward the close of sales as inquiry dropped off.

Analysts suggested a shortfall in greasy stocks was the cause of the market lift, but with some buyers becoming cautious as higher rates ensued with competition for supplies.

The AWEX Eastern Market Indicator finished the week up 49 cents to 1594c/kg clean, with brokers passing in 6.7 percent of the 37,385 bale offering.

AWEX senior market analyst Lionel Plunkett said the price rises experienced in the previous week encouraged more sellers to the market.

“Despite the increased offering, compared to this time last year there has been 89,408 less bales offered for sale, a reduction of 16.1pc.”

He said from the opening lots in the eastern auction markets it was again immediately apparent that price rises were the order of the day, as strong widespread competition helped push price levels slowly, but noticeably higher.

“As the northern region did not sell on the second selling day of last week, they missed out on the gains recorded on that day.

“As a result, Sydney posted the largest gains on the first day of this series,” he said.

The Northern Micron Price Guides (MPGs) added 50 to 72 cents for the day, helping to push the EMI up.

“The second day of selling saw a steadying of the market.

“The individual MPGs in the east recorded very little change, this was reflected in the EMI which remained unchanged.”

Mr Plunkett said it was worth noting that toward the end of the second selling day the market started to soften, so much so that the MPGs in the Fremantle region selling last, dropped by 10 to 22 cents.

Crossbreds outdo the Merinos

“After being the poorest performing sector over the past month, the crossbreds this week recorded the largest increases,” Mr Plunkett said.

“Strong buyer interest pushed prices up by 35 to 70 cents.”

The oddments also posted large rises, and a 50 to 100 cent increase in locks, stains and crutchings helped push the three regional carding indicators up by an average of 65 cents.

Fox and Lillie brokerage manager Eamon Timms said the market might be cheaper next week after inquiry backed off on Thursday.

Mr Timms said there a lot of Chinese buyers looking to buy wool since last Friday and up to Tuesday this week and they were paying at “decent levels”.

He said the buyers were looking to supplement greasy stocks, especially for 18 micron and finer wools.

“There are still stocks further down the system, but greasy stocks have been a bit light on.

“There is a bit of interest to keep machinery going.”

Market is on tenterhooks – AWI

Australian Wool Innovation’s weekly market report said the normally bearish factor of a strongly appreciating Australian dollar against the US dollar proved inconsequential as a potential road block, with immediate demand needs taking charge of the market direction and forcing prices upward.

AWI said the strength of competition between just the top four export trading houses proved enough to force 40 to 60-cent gains across all wools on offer from the outset of selling.

“The four percent price gain in one day is indicative of a wool market on tenterhooks.

“Auctions are now highly reactionary to immediate demand, both to the positive and negative.”

AWI said local and overseas buyers don’t want a heavily-exposed open position and execute purchasing promptly and it appears without price limitations.

The extent of the price differentials that arose from the first day’s selling compared to the previous closing values had many of the buying fraternity commenting that once again “gains went too high, too fast: not good for stability of demand”, AWI said.

“The past three or four weeks of reasonably stable prices of just +/- 20ac had the industry more comfortable whereby both sides of the trade could act with reasonable confidence.

“The halt to gains and pullback in Fremantle on the final day of selling was the inevitable result as most buyers reverted to price-sensitive purchasing.”

AWI said there are probably two major reasons why the market is so jittery.

“Clearly the supply of not just Australian wool, but global supply is being severely negatively impacted.

“This is due mainly to adverse climatic conditions,” AWI said.

“Secondly, some precarious financial impacts would have been incurred by much of the industry due to the rapid devaluation of the wool price that occurred in August.

“Covering off risk is paramount due to both those factors.”

There are 36,497 bales scheduled for sale nationally next week.

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.


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