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Fine Merino wool prices surge as the penny drops on supply

Sheep Central, January 22, 2021

Buyers are seaching auction catalogues and broker’s stores for fine wool. Image – AWEX.

FINE wool prices rebounded in auctions this week, with buyers especially chasing Merino lines under 17.5 microns at auctions and in broker’s stores.

Australian Wool Exchange senior market analyst Lionel Plunkett said almost all types and description recorded rises this week, but wool under 17.5 micron sold up to 156c/kg clean dearer this week.

The national offering fell by 8036 bales to 44,254 bales and brokers passed-in 7.6 percent as the the Eastern Market Indicator (EMI) lifted by 30 cents to 1202 c/kg, its highest week ending level since May 2020.

“This smaller overall selection attracted strong competition, generally pushing prices continually higher as the sale progressed,” Mr Plunkett said.

“Main buyer focus continued to concentrate in the finer microns, resulting in the individual Micron Price Guides (MPGs) for 18.5 micron and finer adding between 23 and 156 cents for the series.

“As Melbourne was the only centre in operation on the final selling day (Thursday) the largest gains were recorded in the south,” he said.

Mr Plunkett said 19.5 to 21 micron clips did not enjoy the same buyer support, so much so that losses of between 3 and 24 cents were experienced in Sydney and Fremantle.

“Only a strong final day rally in Melbourne prevented these types falling in the south.”

Micron price differential widening

Mr Plunkett said as the finer microns continue to rise at a greater pace than the broads, the price differential between microns continues to widen.

“This is best displayed when looking at the difference between the 16.5 and 21 micron MPGs in the south.

“This week that difference stretched to 1055 cents, compared to 906 cents in the previous sale and compared to 499 cents in the first sale of the current season (in July last year),” he said.

“The Merino skirtings followed a very similar path to the fleece, and strongest demand was in wools finer than 18 micron, pushing prices for these types generally up by 40 to 80 cents for the series.

“The oddments recorded large rises for the second consecutive series,” Mr Plunkett said.

“Buyer sentiment was very high, spirited bidding helped to push prices for locks, stains and crutchings up by between 30 and 70 cents.

“This was reflected in the three Merino Carding Indicators (MC) which rose by an average of 41 cents.”

AWTA testing indicates drop in fine wool volumes

AWN wool broker Russell Macgugan said there is definitely a true scale of micron in relation to pricing in the current market and minimal finer end clips coming onto the market.

“It appears that most clips are between 0.5 to 1 micron stronger, although not in all clips.”

National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said there is a feeling around that demand is better for all Merino wool. He said auction offerings showed a drop off in supply of wool in the superfine and ultra-fine end, whereas there are more clips in the 20-21 micron category.

Mr Wilcox said AWTA test data showed that the mean fibre diameter of auction offerings is up 0.3 micron and staple length has increased for the first six months of 2020/21, from July-December 2020.

He said the proportion of 21-24 micron wool in the national clip is up 17pc year-on-year, whereas the amount of 18.5 micron and finer wool is down by 21pc, indicating a big drop off in the amount of wool being tested in that fine/superfine category.

“There is a fair bit of supply (issues) driving this, but probably a bit of demand in it as well.”

Good season has meant less fine wool

Elders business development manager Michael de Kleuver said the season down the east coast of Australia has been tremendous and there has been a general increase in clip diameter, for Merino clips probably a micron broader or more in better areas.

“So we’ve got a decline in fine wool production generally.”

He said the volume of wool tested under 16.5 micron was down about 32pc year-to-date, ‘that’s a big move in that category, so hence the price increase.”

Mr de Kleuver said because prices are improving, growers are selling wool, meaning there is probably less of the fine/superfine wool on hand as there was six months ago.

“I think we sold a nice (14-15 micron) clip out of Tasmania yesterday that averaged $3000 a bale and that’s a long way better than we were six months ago for that wool.

“So there is a genuine desire to sell those wools because they represent very good value.”

Mr de Kleuver said there were premiums now for fine Merino carding wools, which was a true reflection of demand, because most growers don’t hold their locks, stains and crutchings.

“We’ve seen those carding wools getter better and better over the last 6-7 weeks now.”

Mr de Kleuver said there is a general degree of optimism in the trade, with more enquiry from exporters as to wool volumes on hold in storage. The forward market was also more keenly bid into later this year.

“That tells you there is some interest and confidence out there.”

More buying activity from India was also reported in auctions this week, boosting competition in the market.

Next week’s national offering reduces slightly to 43,118 bales.

Sources: AWEX, AWN, NCWSBA, Elders.

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