LOGISTICS and finance issues continue to plague some Australian wool exporters and traders at auction across the country.

The Australian Wool Exchange said the auction market this week negotiated another large offering without recording any large overall market fluctuations.

However, indicators fell for fine and medium Merino fleece in Melbourne and  Fremantle, but fine Merino fleece lifted in Sydney. Crossbred wool prices improved generally.

AWEX said the national offering was 47,915 bales, the fifth consecutive sale above 47,000 bales, and brokers passed in 13 percent of the offering.

“The total amount offered this season continues to track above the last.

“Compared to the corresponding sale of the previous season, there has been 20,929 more bales offered, an increase of 1.7pc,” AWEX said.

“In the Merino fleece sector, the main buyer focus continued to concentrate on better style wool, wool carrying less than 1.5pc vegetable matter (VM) and wool possessing favourable additional measurement (AM) results.

“The strong demand for these types resulted in minimal price movements throughout the week.”

AWEX said lesser style, higher vm lots and wool with less favourable AM results were highly irregular and trended lower as the series progressed.

“These wools were the impetus behind the lowering of many of the individual Micron Price Guides (MPGs) and accounted for most of the 13pc of wool that was passed in,” AWEX said.

“The movements in the MPGs across the regions ranged between +20 and -46 cents.

“The AWEX Eastern Market Indicator (EMI) movements for the three days were -4, -6 and 0. The EMI closed the week 10 cents lower at 1358 cents/kg clean.”

AWEX said currency continues to play a large role in determining market movements.

“If it wasn’t for the weakening of the Australian dollar (the AUD lost 1.56 cents compared to the USD since the close of last week) the falls in the market would have been more substantial.

“This is highlighted when viewing the EMI in USD terms.”

AWEX said the EMI fell by 28 US cents for the series, a reduction of 3pc.

Logistical issues are weakening competition – AWI

Australian Wool Innovation trade consultant Scott Carmody said the substantially weaker Australian dollar against the US dollar could not prevent losses at the Australian wool auctions this week, but it did prevent an even further erosion in values.

Mr Carmody said demand remains positive, but all sections of the auction buying side of the trade are facing tightening finance issues.

“Local logistics operations are struggling to cope with delivery and the subsequent shipping cut off demands.

“This is delaying payments from overseas to buyers and hampers their ability to act bullishly to the demand, thus weakening auction competition,” he said.

“These problems have now extended into multiple weeks.

“Several exporters are faced with having to carefully manage dollars available, as buyers are afforded mostly a one-week payment prompt (due date) from the selling brokers,” he said.

“In context, the past six weeks has seen raw wool purchases at auction exceed A$409 million, with weekly turnover of between $62 and $70m.”

“It is perhaps a signal of the post-COVID labour shortage times because on face value, the situation seems preventable,” he said.

“The volume sold since the New Year sit at just 11,000 bales more or 100 additional 20ft containers (fcl’s) needing to be prepared for and shipped.

“This would require a productivity gain at the wharf of just 2.9pc above the working rates during the adversely COVID-affected March 2022 period,” Mr Carmody said.

“Even two years prior, at the height of COVID in March 2021 the sold figures were almost identical to 2022 for post New Year period.

“It is disappointing that logistics, rather than demand, has largely forced wool prices lower, particularly when most normal indicators have been pointing towards an improvement.”

Mr Carmody said many factors must be considered when in global supply chains.

“Unfortunately for the bottom line of exporters, this unforeseen problem is just another loss to add to the list, but commercial reality and competition does not allow for such a compensatory and ambit amount to be included is sale contracts.

“Unsurprisingly, much of this week’s purchasing was dominated by those larger operators that have a greater access to finance and the ability to carry forward past purchases,” he said.

“Some heavy buying from three or four companies that are funded direct from China certainly helped sale results being lower.

“An impressive buy of 26.5pc of the crossbred wools from one exporter was a standout, as was the influence the largest local trader and the largest China top maker had.”

Mr Carmody said growers have generally been happy to cash in, even though the clearance rates are around 85pc.

“’Normal’ weekly clearances rates are over 90pc when the market is firm and higher again in dearer market weeks.”

Next week all auction centres will be selling on Wednesday/Thursday only, due to a public Holiday in Melbourne on Monday, for the same reason Melbourne is restricted to two days.

Sources – AWEX and AWI.