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Fine Merino wool prices dip, medium wools improve at auctions

Terry Sim, September 9, 2022

AUSTRALIA’S wool market generally dipped this week, driven mainly by less European demand for fine Merino fleece types, but tempered by stronger Chinese buying on medium wools.

The Australian Wool Exchange said the national offering increased by 1818 bales to 37,352 bales, with 11.1 percent passed in.

“There has been 34,309 more bales offered compared to the corresponding sale of the 2021/22 season, an increase of 12.2pc,” AWEX said.

“From the opening of the (auction) series, it was immediately apparent that the prices buyers were prepared to pay for fine Merino fleece types had been significantly reduced.

“These prices continued to fall as the sale progressed.”

By the end of the week, AWEX said the individual Micron Price Guides (MPGs) across the country for 18.5 micron and finer had lost between 15 and 135 cents.

“In contrast, buyer sentiment on the medium/broad Merino fleece types was strong and the prices on offer for good style and spec wools 19 micron and coarser were at or above those achieved in the previous series.

“This was reflected in the MPGs for 19.0 to 22.0 micron which ranged from fully firm to 30 cents dearer.”

AWEX said the ups and downs in the Merino fleece, combined with minimal movements in the skirting, oddment and crossbred sectors — with the exception of 26 micron MPG that increased by 3.7pc — had the net result of an 11-cent fall in the AWEX Eastern Market Indicator (EMI) to 1319c/kg clean.

“Due to a weakening in the Australian dollar — the AUD fell US1.66 cents since the end of the previous series — when viewed in USD terms, the fall in the EMI was larger.

“The EMI lost US29 cents for the week, a reduction of 3.2pc,” AWEX said.

China pushed 19 micron and broader wools dearer – AWI

Australian Wool Innovation trade consultant Scott Carmody said the declining Australian dollar against US and Euro currencies this week assisted in preventing larger price falls for growers paid in AUD.

“Some wool types finer than 16 micron were up to 400 cents clean lower as buyers overlooked this area at the previous price levels, albeit in small offerings.

“Hogget and weaner types were mostly affected, but even the better types were 150 cents lower as buyers readjusted their valuations,” he said.

“These wools are used to produce high-end items that are relatively hard to sell at the moment, so cautious pricing for largely stock inventory is the modus operandi.

The apparent absence of activity or price-sensitive actions from some important European interests saw the 16 to 18.5 micron volume area also lose considerable value to see over 120 cents wiped off values,” Mr Carmody said.

“Many best top making types of 1.5-2.5pc vegetable matter (vm) were the main lots heavily discounted.

“Spinners types were also lowered to similar degrees as the lack of competition at the top of the market went largely to one buyer’s advantage.”

Mr Carmody said the 19 micron and broader Merino wools, considered more of the volume and commodity types, headed to dearer levels as China mainly pushed to buy in the relatively limited offerings.

“The Fremantle centre highlighted this and sold to dearer AUD levels throughout the selling week.

“In fact, the Western Market Indicator (WMI) bucked the Eastern centres trend and saw the entire WA market 12 cents higher on average for the week,” he said.

“The volume of off-shore buying is failing to match the current auction offerings and this is exacerbated by the return of South Africa as a greasy competitor able to ship to China once again.

“Global traders are adjusting their books and strategy back to these normal conditions and once settled, we should have better access to clearer market signals of demand.”

Mr Carmody said Australia has sold 41,487 more bales this season after just seven weeks of selling than at the same time last year, an 18.6pc year-on-year increase.

“Local traders were the main buyers but their purchasing had no sense of urgency.

“As prices lowered significantly at the finer end, Chinese and Indian users increased their interest and buying, taking advantage of the holes in the market created by the lacklustre European buying,” he said.

“Perhaps the higher VM levels that many of these better style and specifications sale lots are carrying is preventing the usual activity from the Europeans.”

The bale offering is expected to rise again next week. Currently, there are 39,719 bales rostered for Fremantle, Melbourne and Sydney.

Click here to see the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.

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