Medium Merino wool demand drives Australian market to new peak

Sheep Central, June 22, 2018

AUSTRALIAN wool prices rose to new historic levels this week, underpinned by unrelenting demand for the limited quantities of 18-22 micron Merino wool available.

The benchmark AWEX Eastern Market Indicator rose 52 cents to another all-time high of 2073c/kg clean, with broker passing in just 2 percent of the offering in Melbourne and Sydney. No sale was held in Fremantle.

With the $A-US exchange rate dropping to US73.61 cents, Australian wool was slightly cheaper for overseas mills buying in $US dollars with the EMI in $US terms falling 3 cents to 1526c/kg.

With brokers offering 20,904 bales nationally this week, 7125 fewer than the previous week, AWEX senior market analyst Lionel Plunkett said the second last sale in the wool-selling calendar was again the smallest for the season and for the past nine years.

“The market continued to improve during the series, mirroring recent trends where most support has been on the Merino Fleece sector.

“The 18 to 22 microns all attracted spirited competition as buyers fought for the limited quantity, driving prices as much as 80 cents higher.

“The ultrafine range also managed improvements but the gains were not as consistent on the back of a mixed-quality selection,” he said.

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Mr Plunkett said prices maintained strength through to the close on Thursday and the overall lift in values added further to an already successful 2017/18 final quarter (April-May-June).

“Since Easter the AWEX-EMI has risen in nine out of the 11 weeks and lifted 300 cents with another week remaining.

“Also of note this week was the (Australian) currency, which fell to its lowest level in 11 months, falling two cents for the week.”

Mr Plunkett said while the 30-32 micron fleece range tracked sideways, persistent support for the finer crossbred microns pushed the 26 and 28 Micron Price Guides into record territory after they gained 30 cents over the two days on a small offering.

“The 20-28 microns are all now at records for the AWEX/AWC series (since 1979).”

Mr Plunkett said Merino skirtings gained 20 to 30 cents while Merino Cardings stepped 20 to 30 cents higher.

Low supplies of medium Merino wool driving market

Endeavour Wool Exports owner Josh Lamb said this week’s rise in medium Merino wool fleece prices was obviously supply driven.

“Certain orders around the world have got to average certain microns and at this time of the year, particularly this year when it has been so dry, those microns are in pretty short supply.

“The other issue is that six monthly shearings are eating into those microns as well …. then you’ve get a squeeze like you’ve got at the moment.”

He said wool from sheep shorn after six months 3-4 months ago, if it had been allowed to grow to full length, would be coming up again in the spring.

“Having said that, there should still be more full-length wool on the market with those microns and there isn’t.

“It’s a combination of dry season and six month shearings.”

Mr Lamb said many clips sold recently are on average 10-15mm shorter than in the same period last year.

“There are a lot more 500mm wools, whereas last year those wools were testing at 60-65mm.”

He said the 18.5-21 micron fleece orders have been dominated by China, and India was buying 21-22.5 micron wools, with a small amount of Japanese business.

Mr Lamb said the traditional coarser crossbred wools were being sold into China, with better styled finer wools going into a 22.5-24 micron Merino-crossbred blend.

“But those wools have to be slightly better prepared with better breeding, so you there are definitely two levels for crossbred wools, with a price difference of 100-150 cents.”

Some of the extra demand and price increase for finer crossbreds is coming from buyers blending this wool with Merino fleece, he said.

“That’s what’s given that fine end of the crossbred market a big lift in the last couple of weeks.”

There are 32,528 bales expected next week in 3 selling centres, the final sale for the 2017/18 season.

Prices lift despite subdued interest from China – AWI

Australian Wool Innovation’s weekly market report said despite incredible gains being posted on local prices here, almost all trading exporters were reporting subdued interest and demand from China.

“There has been some evidence of growing purchasing enquiry from India, which certainly assisted.

“This week though, it was all about a single exchange rate, the $US strength against the $A.”

AWI said the $A usually followed a direct pattern against all of our major trading currencies in a pegged manner, but this past week the $US broke away to it’s own independent position of strength against other currencies.

“Whilst depreciating by over 2.5pc against the $US, the $A was only 1pc lower against the Chinese Yuan and just 0.5pc lower against the Euro.”

Indent operators are currently more influential than normal amongst the Chinese buyers, AWI said.

“This is seen by the cancelling out of US exchange rate advantages by the identical rises in the higher local auction prices.

“This price movement is almost exclusively indicative of these prompt or indent buying orders determining levels in the market,” AWI said.

“What was again noticeable this week was the current strength of one of the largest top makers in China.

“Not only is this top maker buying quantity of wool, they are also picking up a high percentage of the quality wool on offer, particularly at the super fine end of the Merino selection,” AWI said.

“Other Chinese indent operators are also thought to be buying a large portion of their purchased volumes for top makers or commission top makers.

“With first stage processors lapping up a sizeable chunk of current offerings, this augurs well for the immediate to short term prospects of the market.”

AWI said interesting reports have emerged regarding the receival of freshly shorn wool into brokers stores dropping off substantially in comparison to June last year.

“Rostered quantities for the final three weeks selling before the annual three week recess in July/August seem to validate this rhetoric, as figures show that just over 106,000 bales are scheduled to be available in comparison to the 134,000 bales or 26pc more offered last year.

“Obviously, the largest factor is the continuing dry across most of Australia’s wool-growing regions causing growers to off-load sheep as cereal hay, cotton seed and feed grain prices head to (and over in some areas) $400/tonne.”

Next week has 60pc more quantity on offer than this past week at 32,000 bales, AWI said.

“Current sentiment should see a steady market, and a price direction that is largely currency-dependent.”

Sources: AWEX, AWI, Endeavour Wool Exports, Elders.


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