GLOBAL macroeconomic forces have been blamed for a continuing decline in fine Merino wool prices although medium micron values improved at Australian auctions this week.

The Australian Wool Exchange said the market continued to trend lower, recording another overall reduction for the third consecutive auction selling series.

“Main buyer interest continued to be in the medium and broad micron ranges (19-22 micron), solid widespread competition on these types, meant that the prices on offer throughout the series were similar to those achieved in the previous week.

“This was reflected in the individual Micron Price Guides (MPGs) for 19 to 22 micron, whose movements across the country ranged by between +11 and -14 cents,” AWEX said.

“The finer end of the Merino spectrum did not receive the same level of support and the competition on these lots was noticeably lower.

“As a result of this lacklustre demand the prices continued to deteriorate as the week progressed. Hardest hit was 17.5 micron and finer, the MPGs in this range dropped by between 69 and 135 cents,” AWEX said.

“The finer microns have now suffered sustained losses over the previous three weeks.

“The largest falls have occurred in the southern MPGs for 16.5, 17 and 17.5 micron which over this period have fallen by 306 (-10.6 percent), 272 (-10.3pc) and 273 (11.5pc) cents respectively.”

The AWEX-Eastern Market Indicator fell another 13 cents this week over the two selling days, closing at 1306c/kg clean. This the EMI’s third week of falls and the ninth consecutive week where it has failed to register an increase, AWEX said.

“It’s been the longest run without a week-on-week rise in the AWEX-EMI in almost 19 years.

The benchmark indicator is quickly approaching 1300 cents and is now at its lowest level in 16 months.”

AWEX said the crossbred sector performed with mixed results. The 26 and 30 micron MPGs recorded overall increases, while the 28 micron MPGs dropped in both centres, falling to 363 cents in the north and 373 cents in the south, the lowest levels in 22 years, AWEX said.

“The most conspicuous results at this week’s Australian wool auctions was the continuing decline in the super fine Merino types of 18.5 micron and finer.

“In perspective, by cheapening, those types are coming off historically high prices and relatively large price gaps compared to the broader types.”

AWEX said all other types and descriptions on offer – comprising most of the auction volume — managed to either hold their levels and even add a few cents in value across the broader Merino wools, crossbreds and cardings sale lots.

Brokers offered 37,625 bales, 273 more than last week, and 12 percent were passed in.

Global macroeconomic issues hit wool – AWI

The headline factors affecting wools sluggish performance at auction recently has arisen from the global macroeconomic issues such as the high inflation rates and high energy costs driven by the ongoing Russia-Ukraine conflict Australian Wool Innovation trade consultant Scott Carmody said.

“More importantly though for wool prices, the poor domestic consumption figures from China are also having a negative impact.

“The continued zero COVID policy of that nation has consequences that adversely affect consumer spending and that directly interferes with discretionary purchasing on products at the luxury end of the market in which wool apparel mostly sits,” he said.

“The declining value of the Australian dollar has somewhat masked the true effect from those powerful influences.”

Mr Carmody said a truer picture is gleaned from the US dollar values that have contributed to a 14.7pc reduction in raw wool value since the beginning of April 2022, compared tom the 5pc drop in the value measured in and paid for in AUD.

“Local traders were again the leading buyers, but towards the end of the selling week it was notable that the Chinese first stage processors and indent operators were lifting their purchasing rates following the decline in prices that had occurred.

About 37,000 bales are to be offered next week.

Click here to see the latest AWEX Micron Price Guides.

Sources – AWEX, AWI.