WOOL prices fell for a larger offering in a less-favourable currency exchange environment in Australia this week.
AWEX senior market analyst said the Australian wool market ended the 2020 calendar year with a soft finish.
“As this was the final auction selling opportunity before the annual three-week Christmas recess, the national offering increased to 44,835 bales, 6430 more bales than was offered in the previous week.
“The larger selection attracted solid demand, but the market could not sustain the prices achieved in the previous series,” he said.
“Prices fell across all Merino fleece types and descriptions, generally between 30 and 70 cents.
“The losses pushed the Merino Price Guides (MPGs) across the country down across the country by between 10 and 70 cents,” Mr Plunkett said.
“Due mainly to the falls in the MPGs in the merino fleece, the AWEX Eastern Market Indicator (EMI) dropped by 41 cents to 1157c/kg clean for the series, equating to a 3.4 percent fall.
“Worth noting, due to further strengthening of the Australian dollar, when viewed in US dollar terms, the fall was lower, the EMI dropped US18 cents, a reduction of only 2pc.”
National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said in his weekly newsletter that the Western Market Indicator fell the most, down by 46 cents to 1198c/kg, while the Southern Market Indicator was 42 cents lower at 1199c/kg. The Northern Market Indicator fell back by 39 cents to finish 2020 at 1218c/kg.
“The $US continued to struggle against all of the major currencies, including the $A which was US1.1 cents higher at US75.52 cents,” he said.
“This falling $US is not helping $A prices for wool.
“The $A also rose against the Renminbi and the Euro, which have also both risen against the $US, which should moderate the negative impact,” Mr Wilcox said.
“The EMI slid by only US18 cents to US874c/kg, while it was 94 RMB lower at 5725 RMB/kg and 16 €cents lower at 719 €cents/kg.”
Large volumes and currency impacted prices – AWI
Australian Wool Innovation trade consultant Scott Carmody said large volumes and an ever strengthening Australian dollar against major currencies combined negatively to impact prices at wool auctions this week.
“In addition, the urgency of enquiry for new orders slackened in comparison to the past few weeks, although new business was still available subject at lower prices.”
However, he said the week featured an obvious step up in purchasing from top makers.
“As prices lowered under less buying pressure from traders, the largest first-stage processor interests from both Europe and China stepped up their buying volumes.
“Traders were still in play, but were very cautious in taking too much inventory into the three week recess as local storage costs could potentially be a barrier to profitable trading of wool held for longer periods,” Mr Carmody said.
More growers decide to hold wool
Mr Plunkett said the fall in the market understandably pushed the passed-in rate higher, as many sellers were reluctant to accept the reduced prices on offer.
“The national passed-in rate climbed to 18.3pc, this was 13.3pc higher than in the previous series.”
He said the oddments were the only sector of the market to record increases for the series. The smallest of losses in the north, combined with solid rises in the south and west, resulting in an average rise in the three Merino Carding Indicators (MC) of nearly 12 cents.
Sales will resume in the week beginning Monday the 11th of January. In the New Year, three-day sales will be allowed to resume.
In the likely event that Melbourne requires three selling days, it will sell Tuesday, Wednesday and Thursday. If requiring only two days, Sydney will sell Tuesday/Wednesday, while Fremantle will sell Wednesday/Thursday. This is to avoid Melbourne selling in isolation on any day following an extended recess, Mr Plunkett said.
Sources – AWEX, AWI.