Growers hold wool as Merino and crossbred prices slump

Sheep Central, May 17, 2019

Merino and crossbred wool prices slumped this week. Image – AWEX.

AUSTRALIAN wool prices slumped across the board this week, with big falls in Merino and crossbred fleece values prompting growers to pass-in more than 20 percent of the offering at auctions.

The lifting of the South African wool import ban by China and nervousness at t

he renewed China-American trade tariff tensions were blamed for price falls of 50-80 cents for Merino lines and 25-140 cents losses for crossbred lines.

AWEX senior market analyst Lionel Plunkett said the softer tone evident toward the end of the previous week’s sale has carried forward, resulting in price corrections in Week 46.

“Prices were reduced from the opening lot of the first selling day and then slowly but noticeably fell as the day progressed.

“The western region, which sold last on Wednesday recorded the largest falls, generally 45 to 65 cents,” he said.

The benchmark AWEX eastern Market Indicator fell 59 cents to 1893c/kg clean, despite the A-US dollar exchange falling US 0.58 cents to US69.16 cents.

Mr Plunkett said the drop in prices was met with firm seller resistance, as sellers were not prepared to accept the reductions, resulting in a pass-in rate of 48pc in Fremantle.

“The losses felt late on the first selling day in the west were quickly realised when the eastern centres opened on day two.

“By the end of the series, prices across all Merino microns had generally fallen by 50 to 80 cents,” he said.

“As a result of the sharp drop in prices, the national pass-in rate was 21.7pc, the highest figure since October 2018.”

Crossbred prices slump to drop indicator

The decline in the AWEX EMI was its largest weekly fall since November last year.

“The EMI is now 223 cents below the record it set in August 2018 and 50 cents lower than the corresponding sale of the previous season.”

Mr Plunkett said after recording general rises for the past seven weeks, the crossbred sector suffered some large losses this week.

“After reaching record levels over the previous few sales, the individual Micron Price Guide (MPG) for 28 micron wool was the hardest hit, losing 143 cents for the series in the southern region.

“This was a 10.8pc reduction and the largest weekly fall in the 28 MPG since May 2003,” he said.

Chinese retail activity is Australia’s priority – AWI

Australian Wool Innovation’s weekly market report said there was unanimous pre-sale sentiment this week that prices would fall.

“The lifting of the Chinese ban on imports of Republic South Africa wool, albeit with caveats, and the imposition by the USA of import tariffs on Chinese goods produced a state of nervousness in trade.

“This hesitancy has not been seen since October 2018, when a general lack of business saw the market lose 5pc or almost 100c/kg in just a week,” AWI said.

“Back then it took three weeks for the confidence to return and the market settled then moved to a positive trajectory and continued to slowly appreciate to fully recover the losses in three months.”

AWI said it can be argued that the influences on the market this week were largely external factors away from specific Australian wool issues, but in this era of free global markets, business confidence pervades into all markets from all business segments.

“For purely Australian wool interests, we are more concerned with the retail activity from domestic China and Europe.

“This is where our largest volume of middle class and high net worth consumers originate, so the implications these tariffs have on the Chinese economy, rather than the USA, have the majority of influence on the immediate prospects of our markets.”

AWI said perhaps giving some confidence to the trade was the re-entry of the two largest Chinese indent operators into the market, who became progressively stronger as the price weakened.

“In fact, the largest operator finished the week at the top of the Merino fleece buying lists and the other in the top four.”

AWI said with just 25,637 bales rostered for auction next week, followed by two weeks of about 27,000 bales per week, “amidst the general gloom of this week, any slight shift up in demand will see the market turn positive due limited supply.”

Sources: AWEX, AWI.


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