AUSTRALIA’S wool auction market this week hit a four-year low, with prices falling for the second consecutive week of the new selling season.

The Australian Wool Exchange said from the opening lot of the first day of selling, it was immediately apparent that the market was in decline.

“Buyer activity was best described as cautious, with prices deteriorating as the sale progressed.

“By the end of the first day the individual Micron Price Guides (MPGs) for Merino fleece had fallen by between 4 and 44 cents, with only the 17 micron MPG in the north defying the trend, posting a 13-cent increase,” AWEX said.

“Falls in the other sectors resulted in an 18-cent fall in the benchmark AWEX Eastern Market Indicator (EMI).

“The 18-cent fall in the EMI was the largest daily fall of the season and the largest since the 22nd of August last year,” AWEX said.

“The EMI fell to 1095 cents.

“This was the first time the EMI dropped below 1,100 cents since the 13th of October 2020, when the EMI was trading at 1,066 cents.”

AWEX said on the second day of the series only Melbourne and Sydney were in operation, where further falls were recorded, although less severe than the first day.

“The Merino fleece MPGs dropped by a further 1 to 36 cents and the largest fall was in the 17 micron MPG in the north, pushing into negative territory for the week.

“The EMI lost a further 8 cents, closing the week at 1087 cents a kg clean, 26 cents lower,” AWEX said.

“This was the largest weekly fall in the EMI since Week 8 last season (23rd of August 2023).”

AWEX said the drop in prices was met with seller resistance across all three centres, pushing the passed in rate up to 11.9 percent.

Machine demand is main price determinant – AWI

Australian Wool Innovation trade consultant Scott Carmody said machinery demand remains as the almost exclusive price determining and buying volume factor.

“This has been the inclination for the past few months now.

“The two major Chinese top makers purchased almost a third of this week’s offering again, perhaps indicative of that scenario, rather than an abundance of wool tops sold,” he said.

“Towards the end of selling this week, Australia’s largest wool trading house did up their ante somewhat and re-appeared to near their normal positioning as the largest purchasing entity.

“Their nearest trading competitor though again maintained their more consistent and regular buying pattern of the past few weeks and remained in the top four of the differing type sectors, providing the necessary competition to the first stage manufacturers,” Mr Carmody said.

“With such a sluggish demand scenario remaining in play, it is of no help at all to see the Australian dollar (AUD) versus the US dollar (USD)  and other currencies used in the wool trade go against the local auction AUD price once again.

“The AUD forex rates strengthened around 0.5 to 0.8pc against all the majors, which obviously makes it hard for offshore based funds to turn the local Australian wool auction market prices to the sellers favour,” he said.

Mr Carmody said the 2023/24 season export data from the ABS (Australian Bureau of Statistics) has been finalized.

“Chinese import of Australian wool was dominant at 86.4pc of volume and 84.1pc of A$ value of all Australian wool exports.

“This is an increase in market share by volume of 4.7pc, but 6.4pc more of the total A$ export value.

“India received around 5.1pc of the export volume and value which is a 22.5pc decrease year on year in both measurements,” he said.

“Italy was next in line by importing 2.6pc by volume, but jumped to 4.9pc of the value, influenced by the Italian predisposition to buying a high proportion of the top end of the wool types.

“By volume Italy is 28.8pc lower and 30.3pc lower by A$ value year on year.”

Next week’s national offering is smaller, due in part to the lower prices on offer this week, discouraging some sellers. There are currently 33,830 bales on offer in Sydney, Melbourne and Fremantle.

Sources – AWEX, AWI.