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Future supply fears and lower dollar lift Australian wool prices

by Sheep Central, 11 May 2018

GROWING fears about future supplies and a weakening Australian dollar helped lift wool prices to historic levels at auctions this week.

Australian Wool Exchange senior market analyst Lionel Plunkett said although overall losses were recorded in the previous sale, positive movement was experienced in the Western region toward the end of the week.

“Buyer concern over securing quantity in coming weeks, combined with the weakening of the Australian dollar has helped continue this positive trend.

“These factors helped to create very strong buyer demand and the result was sharp upward movements,” he said.

In its largest weekly rise since February, the benchmark AWEX Eastern Market Indicator closed 55 cents higher at 1981c/kg clean, with brokers passing in 2.3 percent of the offering of 37,842 bales, 4952 fewer than last week.

“Despite the offering again consisting of a large percentage of lower yielding, lesser style lots, price increases were felt on all types and descriptions, across the entire Merino spectrum.

“By the end of the week, wool was generally selling at levels 60 to 90 cents above those achieved at the previous sale,” Mr Plunkett said.

“The individual Micron Price Guides for 20, 21, 22 and 23 microns also set new records, beating their previous highs by over 40 cents.”

Mr Plunkett said the skirting market followed the lead of the fleece, also managing strong gains for the week, generally 25 to 50 cents.

“The largest increases were in wool 18 micron and finer, or wool carrying less than 3pc vegetable matter.”

Crossbred wool had mixed results, with the 26-28 micron fleece increasing in price by 5-10 cents.

“Notably, this pushed the 26 micron MPG to a new high.”

The 30-32 micron crossbred wools sold on a par to 5 cents easier.

Mr Plunkett said a limited supply of oddments attracted excellent competition, pushing prices up by 20 to 40 cents, and wool finer than 18.5 microns was most-affected.

“This was reflected in the three Merino Carding Indicators (MC) rising by an average of 26 cents.”

Buyers rush to renew global pipeline supplies – AWI

The Australian Wool Innovation weekly market report said the main impetus centred on Merino wool with the fleece sector the most sought after as overseas users placed orders to renew the rather empty greasy wool pipeline in front of machinery globally.

“China was again dominant in the demand stakes and seemed intent on getting set for quantity, somewhat irrespective of price as supply fears around the availability of the quality wool required grows.

“Meanwhile the foreign exchange rates of the AUD versus the USD is at its lowest level since the middle of June 2017.”

AWI said the AWEX EMI’s week-ending all time highest level of 1891c/kg put the benchmark as 23pc dearer than last year. The EMI in $US rose US33 cents to US1414c/kg.

“The EMI gain when expressed in $US was somewhat diluted compared to the local $A price rises as the forex (foreign exchange) rates fell nearly 1pc for the week.

“This helped those buying wool in $US negate some of the price hike,” AWI said.

“As most of the Chinese buying activity is conducted using US dollars, this falling value of the $A only helps sellers here in Australia as the rate heads towards the 70-cent mark more each day.”

AWI said last month’s April AWTA data showed that volumes being produced across Australia are at least matching that of last season, despite the harsh conditions of this growing season.

“At these good sheep meat, lamb and wool price levels, wool producers are intent on keeping their numbers of sheep as high as possible and are presently dedicated to feeding daily to ensure the core breeding flock is kept intact.

“Posing somewhat of a risk to this strategy is the rising prices of hay and feed grain and the inevitable high costs of carting water once the dams completely dry up,” AWI said.

“Heading into winter, even if good rain events do occur, the soil temperature will inevitably fall below what is required to promote pasture growth, and indeed in many areas frosts have hit already and snow falls across the North of Victoria and South of NSW the past few days.”

Next week quantities remain very similar; currently there are 37,496 bales rostered.

“The IWTO conference in Hong Kong may provide a distraction for some, but all eyes will no doubt remain focussed on the market,” AWI said.

Click here for the latest AWEX Micron Price Guides.

Sources: AWI, AWEX.

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