Australian wool prices regain lost ground, but there is a stockpile

Sheep Central, October 25, 2019

Merino and crossbred wool prices recovered some ground this week. Image – AWEX.

AUSTRALIA’S wool market continued on a positive note this week, with the benchmark indicator rising for Merino and most crossbred fleece wool.

However, the large passed-in rates of the previous two months mean there is a growing stockpile of wool sitting in broker’s stores.

Brokers this week passed in 7.1 percent of the 29,760 bales offered in Sydney, Melbourne and Fremantle this week.

AWEX senior market analyst Lionel Plunkett said the auction market rose for three consecutive days with the AWEX Eastern Market Indicator closing 28 cents higher on 1545c/kg clean.

“The positive buyer sentiment evident toward the end of last week, carried forward into the first day of this series, resulting in price increases from the opening lot.

“The increases slowly but noticeably increased as the day progressed, continually strengthening all the way to final hammer in the Fremantle market, which sold last,” he said.

“By day’s-end the individual Micron Price Guides (MPGs) rose by 10 to 31 cents in the east and by 35 to 49 cents in the west.

“As Sydney only sold on the first day, Melbourne opened in isolation on day two and the market continued to rise, albeit modestly when compared to the solid gains achieved on the first day,” Mr Plunkett said.

“The Melbourne MPGs rose by 10 to 34 cents, and on the back of these rises, the EMI added a further 14 cents, to close the week 28 cents higher at 1545 cents.”

Mr Plunkett said the Fremantle region continued to strengthen, with the MPGs in the west adding another 26 to 36 cents.

“In a rare turn of events, the Fremantle MPGs for 19.5 through to 21 micron are sitting above those of the eastern centres.”

Crossbred wools performed better than in recent weeks, and solid gains on the second selling day in Melbourne helped the crossbred MPGs add 10 to 32 cents for the series.

The price rises of the past week has encouraged many sellers to market, increasing next week’s national offering to 39,446 bales.

Global signals turning positive – AWI

Australian Wool Innovation’s weekly market report said the global economy continues to try and resolve itself, but most signals are now swinging to the more positive of outcomes.

“One thing that is out of politicians hands that will help stimulate the global wool chain is strong retail figures.

“Most trade participants are hopeful that the early autumn sales produce the expectations that consumers are renewing their spending, particularly for the discretionary luxury spend area of retail that wool sits in.,” AWI said.

“Australian trading houses dominated the purchasing activity this week, but significantly, the largest Chinese top makers upped their ante to participate far more strongly than they have been for the past month or so.

“Perhaps, and hopefully, this is indicative that some of the back log is clearing at the top to spinning stage where cash flows have been restricted due to delays in the uptake of wool top contracts,” AWI said.

AWI said the auction rooms again operated in a controlled manner this week.

“The pattern of very large rises and falls has seemingly gone for now, as this was the third consecutive week of relatively sedate price movements.

“US prices rose and while overseas buying did back off somewhat, there was still ample business to see the market continue to climb against potential road blocks such as the stronger forex.”

AWI said this season has seen the general re-emergence of a very influential price protection tool for wool growers; the use of the passed-in mechanism.

“This has helped maintain the market rates at acceptable levels but the growing stockpile must be continuously monitored.

“If not openly measured and identified, this stockpile may inevitably become problematical for the industry,” AWI said.

“At present though, retention by growers of some of their wool is enabling the supply chain further up to rid themselves of stocks without having the added financial burden of having to finance potentially speculative only new buying of greasy wool.

“This current situation will help cash flows to return to the first stage manufacturing sector.”


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