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Australian wool market rises, but with a warning

Sheep Central, October 11, 2019

Wool growers are showing an increased willingness to withdraw wool from sale. Image – AWEX.

AUSTRALIA’S wool market lifted again this week, but with a warning that many wool growers now stood prepared to resist price declines by withdrawing supply.

The AWEX Eastern Market Indicator rose 32 cents this week to 1543c/kg clean, but 7.6 percent of the 28,149 bales offered were passed in, after 18 percent of the original catalogue of 34,000 bales was withdrawn before auctions.

Australian Wool Innovation’s weekly market report said last week’s AWTA key test data figures revealed what most were thinking, showing that Australian wool production has decreased by 14% already this year.

“On top of this, a good proportion of the wool grower sellers are resisting any further price decreases as they either withdraw their wool prior to auction or pass in their wool if the price offered fails to meet their expectations.

“The above situation should come as a supply warning to the trade, as wool growers are the most aware of all participants as to what volumes are likely to be produced,” AWI said.

“The message from many wool selling brokers is quite clear.

“A lot of the growers affected by drought are now in a position to not have to, or need to, sell their wool,” AWI said.

“Unfortunately this is because they have sold their sheep at good prices and in many cases, it is core breeding stock that has been off loaded.”

AWEX senior market analyst Lionel Plunkett said many veteran wool traders have commented that the current market conditions are unprecedented, with the large market fluctuations making trading a very difficult exercise, even for the most seasoned of operators.

“Highlighting this market volatility, has been the movement in the AWEX Eastern Market Indicator (EMI) over the previous 10 weeks.

“When viewed in both positive and negative directions, the EMI has moved a total of 763 cents over this period.”

Mr Plunkett said with the national offering reduced to 28,149 bales this week, compared to the corresponding sale of the previous season, the total number of bales offered has fallen by 85,494 bales, a reduction of 19.1pc.

“As the sales commenced in the eastern centres, it was immediately apparent that this week’s market direction would be upward.

“The main buyer focus was on wool 18.5 micron and coarser and these wools enjoyed the largest price increases,” he said.

The individual Micron Price Guides (MPGs) in Sydney and Melbourne for 18.5 micron and coarser rose by 28 to 47 cents on the first selling day. On the back of these rises the EMI rose by 18 cents to 1529 cents.

“As the news of the rises made its way west, many sellers decided against offering their wool, resulting in 34pc of the total offering and over 37pc of the fleece being withdrawn prior to sale.

“This significant reduction in the available quantity, put extra pressure on what remained, pushing the MPGs in Fremantle up by 39 to 55 cents,” Mr Plunkett said.

The second selling day the market consolidated, adding small increases to those of the previous day. The MPGs across all three centres rose by 4 to 34 cents. The EMI added another 14 cents to close the week at 1543 cents.

Price rises symptomatic of industry volatility – AWI

AWI said this week’s wool auctions again produced results symptomatic of the volatility that surround wool pricing at present.

“On the back of last week’s sharp decline, the lower prices helped extract fresh business from overseas users.

“This caused prices to revert upwards on most sectors.”

AWI said short-term trends have been non-existent for the past few months, indicative of an industry struggling to find a safe and profitable level of trade.

There are currently 40,056 bales rostered for sale in Australia next week.

Click here to see this week’s AWEX Micron Price Guides.

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