More wool and higher Aust dollar weakens auction prices

Sheep Central, February 26, 2016

Wool sales Landmark1 MelbourneA STRONGER Australian dollar and more wool hit Merino fleece prices hard this week.

Australian Wool Innovation’s weekly market report said a stronger $A against the $US provided the catalyst for a price weakening and more wool from sellers allowed a very circumspect approach to purchasing by the exporters.

As the Australian-US dollar exchange rates lifted to US71.75 cents, the AWEX Eastern Market Indicator fell 17 cents to 1268c/kg clean, putting it 180c/kg clean or 16.5pc higher than last season at the same time. The EMI in US dollar terms fell 11 cents to 910c/kg, AWEX said.

AWEX senior market analyst Lionel Plunkett said the subdued mood of the final selling day last week persisted into this week, with both days recording a negative result.

The offering this week was about 3000 bales short of the original estimate, but 4331 more than last week and the largest in five weeks.

“Prices contracted from the outset, with a reduction of 15 to 20 cents fairly typical on the first day.

“There were exceptions, but these were limited to the better spec types which continue to find favour with buyers,” he said.

Premiums for good spec wool

Sydney hosted a designated superfine sale and selected lots at that centre, as well as in Melbourne, revealed large premiums over the more extensive lower spec types, Mr Plunkett said.

“Thursday’s results were less clear; Melbourne and Fremantle continued to trend lower across all microns, while Sydney was only a few cents cheaper.

“Support for the better types in Sydney contributed to the superior result at that auction.”

Merino skirtings recorded another week of only minimal movements in the quotes, despite falls in the fleece sector, he said.

“Most movements were in the higher vegetable matter content types, which adjusted their prices lower, while best length/low vm were barely affected.

“The steady result for these types combined with the falls in Fleece catalogue has narrowed the price gap between the two sectors.”

Mr Plunkett said crossbred wools fell 10 to 15 cents, with the few 25-micron types the only bright spot for the sale.

“Merino cardings tracked sideways for the week, closing at similar prices to last sale.”

Moderate interest from buyers

The AWI report said this week’s wool auctions suffered this week from a moderate, at best, interest from most buyers. In general terms the market for the better Merino wools held on well to their price levels, but any types exhibiting specifications outside of the European and better Chinese and Indian orders were cheaper from the outset.

Unfortunately for local sellers, the $A vs $US rates were the most disadvantageous during selling at around US72.30 cents on Wednesday and US72.05 cents on Thursday.

Best Merino types were basically firm to maybe just 5 to 10 cents cheaper on some lots, while 40 to 50 cent discounts could be seen on the lowest quality edge of the FNF/LB, 0.1- 3pc vm, top-making types. The 19.5 micron and broader wools sold progressively cheaper throughout, irrespective of quality and concluded around 20c/kg lower.

“Interesting to note was that the large offering of heavier vm fault (3.1-8pc) Merino fleece types held onto their price basis extremely well as a large Chinese top maker almost completely dominated the forward sellers and traders operating in this type area,” the AWI report said.

Is increased Merino interest later this week a good sign?

The AWI report said the firming of interest on most Merino types later this week might indicate a more positive market for the 42,631 bales on offer next week.

“With China interest back to relative normality, we expect to see an increasing interest from Chinese buyers as supply dwindles heading into the Australian autumn.

“The low supply situation will be exacerbated further if good general rains are not received in most of our wool growing areas, as growers are unlikely to hold and feed stock given the current relatively good mutton values.”

Click here for the AWEX Micron Price Guides.

Sources: AWI, AWEX


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