Australian wool growers hold stocks as auction prices slide

Sheep Central, June 14, 2019

AUSTRALIAN wool growers passed in more than 20 percent of bales offered nationally this week as major Chinese buyers stood out of the market.

The quality-related slide in prices of up to 95 cents for fine Merino wool led to brokers passing in 21.3pc of the offering of 28,140 bales, 6353 fewer than last week, although helped by Fremantle resuming sales.

AWEX senior market analyst Lionel Plunkett said with only two weeks remaining on the 2018/19 wool selling program, the national offering has fallen by 220,733 bales, a reduction of 12pc when compared to the 2017/18 season.

He said best style wools with good additional measurement results, attracted strong demand and recorded only minimal losses this week.

“The lesser style wools and those with poor additional measurement results; however, lost buyer support and continued to lose ground.

“By the end of the series these types were generally selling at levels 50 to 90 cents below the prices achieved in the previous week.”

The price reductions resulted in the AWEX Eastern Market Indicator (EMI) losing 41 cents for the series, to close the week at 1823c/kg clean.

“After a strong start to the calendar year, where the EMI rose for the first seven weeks, climbing from 1862 cents to 2027 cents, a gain of 165 cents, the EMI has now fallen for five of the previous six weeks, dropping a total of 113 cents over this period.

“The EMI is now 293 cents below the record of 2116 cents it achieved in August last year and 198 cents lower than the same time last year, a fall of 9.8pc, Mr Plunkett said.

The crossbred sector recorded losses, generally between 20 and 30 cents and the poorly prepared lines were most affected as buyers focused on the better wools, he said.

The oddments were also discounted, with most types and descriptions falling by 20 to 30 cents. The three carding indicators fell by an average of 20 cents.

Major Chinese indent buyers disinterested

Australian Wool Innovation’s weekly market report said the superfine Merino (18.5 micron and finer) sector was hardest hit this week, and continues to be negatively impacted by relatively large volumes of low yielding drought effected sale lots and the sparse demand for such wools.

“Processors and top makers remain the keenest amongst the buying fraternity with three of the four market sectors topped by these machinery owners.

“Crossbred buying was largely in the hands of firm offer forward contractors,” AWI said.

“Once again there was very little interest from the large Chinese indent buyers, but the as prices fell even further on the final day, one of those operators upped their ante and started to pick off some volume at the cheaper levels.

“Purchasing activity by dedicated trading companies was certainly evident, but their volumes of trade are being restricted by the generally inferior selection on offer.”

AWI said the current offering remains predominantly wools that are hard to place into standard contracts to Australia’s two largest manufacturing destinations of China and India.

“Yield and strength (nkt) test readings are abnormally low due to poor seasonal conditions across half of our growing regions.”

AWI said somewhat of a stalemate exists as far as forward contracts support of local wool markets go.

“Exporters are reticent to sell too much volume forward as this will expose them to high loss risk if the market turns, whilst the overseas buyers are unable to get set for the full amount of quantity they would like to get set for, which would in turn assist in underpinning the market.

“Quality of the offering going forward plays its part in this scenario as well.”

The Fremantle region will have another one-week recess in Week 51. Currently there are 19,745 bales rostered for sale, with selling in Sydney and Melbourne only.


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