AUSTRALIAN Merino and crossbred fleece wool prices improved further this week, with buyers focussing on better prepared lines with less vegetable matter content.
AWEX senior market analyst Lionel Plunkett said general price increases of 20-50 cents were enjoyed across the entire Merino spectrum.
“The benchmark AWEX Eastern Market Indicator rose by 8 cents, to close at 1820 cents, only one cent below the record level achieved in January.”
Brokers passed in 5.4 percent of the 41,669 bales offered, which was 850 fewer bales than last week. The EMI in $US terms closed down 17 cents to US1419c/kg clean.
Mr Plunkett said as the year progresses, so too does the amount of vegetable matter in wools across the country. This is particularly so in the eastern states, where free or nearly free (FNF) wools with less than 1pc vm currently make up just over half of the fleece offering.
“The continual decline of these of these wools, is increasing the premium that buyers are prepared to pay, resulting in larger price rises in these types, when compared to similar wools carrying more fault.”
Crossbred wools gain 5-20 cents
Mr Plunkett said the crossbred sector has managed to record rises for the third consecutive week. Gains were posted across the entire range, generally between 5 and 20 cents. Main buyer interest was focussed on better prepared lines, and as a result these wools enjoyed the greatest lift in price.
Skirtings and oddments lose ground
Mr Plunkett said the skirting market went against the trend of the fleece. Losses were felt across all microns, generally of 20-30 cents, with wools with less than 2pc vm least-affected.
The oddments were discounted in the sale.
“Wools carrying more than 3pc vm were the hardest hit as buyers favoured the lower vm types.
“Prices were generally reduced by 20 to 40 cents, pushing the carding indicators down by an average of 23 cents,” he said.
Gains attributed to foreign exchange changes
Australian Wool Innovation’s weekly market report said business conditions remain relatively subdued as China was on holiday and most of this series gains can be attributed to the more advantageous forex (foreign exchange) rates.
The forex (foreign exchange) rates this week acted in a completely reverse manner to last week, with overseas demand weakening slightly and prices in $US dropping.
“The activity and price pressures in wool trading and manufacturing for years now has purely and simply been ruled by the growing demand for our fibre,” AWI said.
“As the wool price escalates to higher levels, particularly Merino, exporter-buyers bank accounts have seen significant ebbs and flows over recent months given the significant finance that is involved with wool buying these days.
“A full container load of Merino fleece carries about 108 bales and this now represents well over A$300,000 of raw wool value, therefore it is common that managing financing stress has become a regular component of buyer management,” AWI said.
“To some extent forex rates are also a factor, but the ever-changing rates are more of an adjustment factor for day to day pricing operations and not the mechanism for setting medium to longer term prices.
“The rates become more important when clear demand for prompt business is not apparent or when exporters are reticent to book firm contracts, and indents are then having to be placed into the market and these are based on USD amounts” AWI said.
The attractive wool prices have led to rostered auction quantities increasing throughout February from original schedules, and next week 44,506 bales will be for sale in Sydney, Melbourne and Fremantle.
“This is up from 39,100 bales or 14pc higher than what was advertised just last week.
“Similar trends are expected to remain in-play and dollar-related movements are the most common held expectations,” AWI said.
Sources: AWEX, AWI.