Shipping deadlines, a stronger dollar and volumes hit wool demand

Sheep Central, December 6, 2019

AUSTRALIAN wool prices continued to deteriorate this week as demand was hit by a stronger dollar and increased supply, and tightening shipping deadlines leading up to the Chinese New Year.

AWEX senior market analyst Lionel Plunkett said the auction market recorded losses for the third consecutive week and growers reacted by passing in more sale lots.

“Better style wools with favourable additional measurement results, were least affected by the falling market, generally selling at levels 20 to 30 cents below those achieved in the previous week.”

He said lesser style wools, wools with poor additional measurements and those carrying higher levels of vegetable matter did not fare as well, as buyers continually discounted their price levels on these wools.

“By the end of the series these types had generally fallen by 50 to 80 cents.

“The drop in these lesser types was the driving force behind the reduction in the individual Micron Price Guides (MPGs), which fell by 26 to 72 cents across all three centres,’ he said.

On the back of these losses, the AWEX Eastern Market Indicator lost 38 cents for the sale series, closing the week at 1492 cents/kg clean.

“The EMI has now fallen for seven consecutive selling days, losing a total of 105 cents over this period.

“When compared to the corresponding sale of the previous season, the EMI has dropped 357 cents, a fall of 19.3 percent,” he said.

“Sellers across the country were reluctant to accept the reduced-price levels and the national passed-in rate was 20.4pc, 6.2pc up on the previous series.

“The large number of passed in lots adds to the continually growing stockpile of wool being held in brokers stores,’ Mr Plunkett said.

The oddment sector was the only shining light in an otherwise dim market, managing to record minimal positive movements, he said.

“This was reflected in the three regional carding indicators that rose by an average of just over 2 cents.”

Mr Plunkett said with only two selling weeks left before the annual three-week Christmas recess, quantities traditionally increase for the final two sales.

Increased quantities conflict with delivery capability

Australian Wool Innovation trade consultant Scott Carmody said a strengthening Australian dollar against all major currencies used in wool trading placed downward pressure on the market, as did the lack of ability of local and overseas buyers to effect delivery in a timely manner into the Chinese mills in the New Year.

The AWEX Eastern Market Indicator’s closing level of  1492c/kg clean is the lowest since the first week of September earlier in the season. Due to forex rates, the US$EMI fell away less by 1.4pc or US15 cents to US1020c/kg clean.

Mr Carmody said the issue affecting the immediate spot auction sales is the timing of large volumes coming onto the market in an environment where normal delivery capabilities for overseas buyers and local exporters are severely hampered.

“This is due to the Chinese New Year falling on the 25th of January next year.

“This week was, in effect, the last pre-Christmas opportunity to ship in time before the Chinese mills close down in their New Year shutdown,” he said.

“In a nut shell, we are offering the highest volumes seen in the entire first half of the season into the most inopportune time possible for exporters and mills.

“The simple breakdown is effectively a two to four-week additional financing period required for exporters for any wool purchased destined for China in the next two sale weeks if the client doesn’t call for delivery,” Mr Carmody said.

“One week for shipment delay due to Christmas break and up to two weeks for the shutdown from 25th January.

“Margins for wool export are extremely competitive at the best of times, so this situation is causing some angst amongst the trade, particularly given the very hand to mouth modus operandi that the majority of the trade is utilizing.”

Mr Carmody said there are now 48,451 bales rostered for sale next week.

“Just last Friday that figure was around 39,500, so an additional 23pc is now being offered.

“The last sale week forecast in a fortnight’s time has also grown by over 2000 bales or 6pc to just short of 40,000 bales.”

Mr Carmody said the AWTA November 2019 key test data shows that 0.9pc less wool was tested in November 2019 compared with the same period last season.

“The progressive comparison of total weight tested for July 2019 to November 2019 compared with the same period last season showed 8.5pc less wool was tested.

“AWTA Ltd has tested 127.5 million kilograms this season, compared with 139.4mkg for the equivalent period last season,” he said.

“Based on this, the current best guess for 2019/20 volume of wool tested looks like being around 291 m/kg maximum, which lines up pretty well with the Australian Wool Production Forecasting Committee’s figure of 272m/kg or a 9.2pc reduction.”

Click here to see the latest AWEX Micron price Guides.


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  1. Peter Small, December 6, 2019

    I refer growers to my article on Sheep Central of the 16th October. Whilst it is the right of every grower to withhold wool for as long as they wish, I would remind everyone of the dangers of building stocks of product at any point in the pipeline. There are already large stocks over over-priced tops, yarn and fabric. To build stocks of greasy wool at this point in the economic cycle could be foolish beyond belief. To ensure the long-term future of our industry, we must get wool products moving across retail shelves. I would encourage all growers who can possibly do it, to meet the market. As I explained in my 16th October article, this market will be subdued for sometime.

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