AUSTRALIAN crossbred wool prices improved, but Merino values drifted lower with the absence of major Chinese buyers from auctions this week.
Despite a smaller national offering of 32,801 bales, 10,252 less than last week, the benchmark AWEX Eastern Market Indicator fell eight cents to 1952c/kg clean and brokers passed in 12.9 percent of the offering.
AWEX senior market analyst Lionel Plunkett said the effects of the drought continue to be evident in the selection, pushing both yields and quantities down.
“Compared to the corresponding sale of the previous season, there has been 204,381 less bales offered, a reduction of 12.1pc.
“So far this season 26.4pc of the Merino fleece offering has been style 4,” he said.
“This is 15pc lower than at the same time last season.
“Despite the reduced quantity, buyer activity could best be described as cautious and many exporters adopted a “wait and see” approach,” he said.
“The result was a continuingly softening market that by the end of the series meant that prices had been generally reduced by 15 to 40 cents, when compared to the previous week.
“Some off-style and inferior types struggled for buyer attention and were up to 50 to 70 cents cheaper.”
Mr Plunkett said crossbred wools continue to be the strongest performing sector of the market.
“Strong buyer demand helped to defy the trend seen in the Merinos, pushing prices higher.
“The 26 through to 28 micron wools generally rose by 10 to 15 cents, with the better prepared lines enjoying the greatest gains,” he said.
“The increases pushed the individual Micron Prices Guide (MPG) for 28 micron further into record territory in both Melbourne and Sydney.
“The rise in the crossbred MPGs is the reason behind the EMI only recording an 8-cent loss.”
Australian Wool Innovation’s weekly market report said a pragmatic approach to purchasing by the majority of buyers at this week’s Australian wool auctions saw a market that largely went to the buyer’s favour.
“The week’s operations featured the continued weakness of the two largest Chinese indent operators (Seatech and Kathaytex) within the Merino fleece.
“This lack of purchasing intent saw that sector flounder and drift downwards, as the exporters that were interested were advantaged and this allowed the price to drop back to their ideal levels,” AWI said.
AWI said as the two big guns from China basically sat out from this week’s purchasing activity again, in the Merino segment, the processors and top makers took the opportunity to load up their inventory levels once more.
“The absence of the normally stiff competition of the indent operators, who represents mainly the China-based trading companies and smaller mills who don’t have their own import and international banking set ups, allowed a general freedom in price determination as the Australian exporters looked to the top makers to ascertain what buy-in levels they should pay, or have to pay to satisfy prompt needs.”
AWI said with all South African wool imports still banned into China, the prompt machinery demand must chiefly be met by Australian supply, hence the heavier purchasing activity percentage by the two largest Chinese top makers at the top of Australian buying lists.
“At this stage of the season with just seven weeks of selling left, we have seen a staggering 248,004 fewer bales sold through the auction system than at the same period of last season.
“This represents a reduction of 15.7pc which far exceeds the AWTA key test data which shows a 10.3pc year-on-year retraction of all wool tested,” AWI said.
“Possibly these auction figures are exaggeratingly lower as anecdotally an appreciable uplift in private, direct supply contracts has been reported.
“Mainly affected are high quality superfine wool clips and various forms of audited compliancy schemes clips being the areas of production most likely eliminated from the auction figures,” AWI said.
“In addition, many of the purchasing operators are now represented by direct buying operations in the regional areas, which would be almost exclusively direct to export and bypassing the auction system.
“Australian wool export figures from March show China lifting its market share from 71 to 73pc for the current season.”
This falls short of the 76pc of a much larger offering last season, but with a quarter of the season’s numbers still to come in, that percentage is likely to lift again, AWI said.
Currently there are 33,361 bales catalogued for auctions in Sydney, Melbourne and Fremantle next week.