Strong pre-Christmas buying lifts Australian wool prices again

Sheep Central, December 1, 2017

STRONG pre-Christmas buying at auctions has lifted Australian wool prices out of last week’s dip.

AWEX senior market analyst Lionel Plunkett said despite a reasonably large offering of 49,058 bales – 649 more than last week — the market bounced back into positive territory again.

Helped by Merino wool prices generally rising 15-30 cents, the AWEX Eastern Market Indicator lifted 7 cents to 1676c/kg clean and brokers passed in just 4.4 percent of the offering.

The EMI is now 298 cents above the level of the corresponding sale of last season, an increase of over 21pc.

In US dollar terms, the EMI rose just 1 cents to US1271c/kg clean as the $A-$US exchange rate softened to US75.86 cents.

“With only two sales to go before the annual three-week Christmas recess, buyers were keen to secure market share whilst the opportunity presented itself,” Mr Plunkett said.

“As a result, all types and descriptions across the entire Merino spectrum came under intense buyer scrutiny.

“The increase in prices was gradual rather than extreme, as buyers had to slowly increase their levels to secure market share,” he said.

“Notably, the skirting market experienced similar movement to the fleece, gradual increases rather than dramatic rises.

“Main buyer interest was focused on wools carrying less than 2pc vegetable matter or those exhibiting excellent additional measurement results.”

Mr Plunkett said the crossbred market defied the other sectors and continued its downward trend.

“Prices were generally discounted by 10 to 25 cents.

“Buyers were very selective with their purchases, any lots that were poorly prepared were often overlooked and, as a result, suffered the greatest reduction in price.”

The oddment market has continued its strong climb upwards. The increase in levels was also gradual, resulting in the three carding indicators recording an average increase of 3 cents, Mr Plunkett said. Washing lambs (<0.3pc vm) were extreme as buyers attempted to purchase these types before the small buying window closes for the year.

Buyers with money are buying

Australian Wool Innovation’s weekly market report said the talk on show floors this week still revolved around those who had cash and those that did not.

“Large volumes for sale and the much higher cost per bale generally have buyers finances stretched to the limit.

“This situation should be alleviated somewhat in the coming week or two as November shipments are due and letters of credit are opened, allowing for buyers to regain their full budget limits for purchasing.”

AWI said strong demand for prompt and nearby shipment is still being reported from various global destinations.

“Some mills are still in need of raw wool requirements prior to the Christmas recess in order to keep production flowing and fabric and garment orders fulfilled in time into the New Year.

“The return of funds to buyer’s accounts should enable these manufacturers the access to forward contracts at fixed prices, as their suppliers are able to fully participate at auction and cover off the price risk for the trading partners.”

Alternatively, AWI said buyers should now be in a cash positive position to also offer indent orders to their clients, with zero risk at an albeit low margin, and a quick return of funds an attractive proposition for the immediate two weeks prior to the Christmas recess in selling.

“A continuation of the top three or four auction buyers dominating the purchasing, weakened somewhat this week.

“Their purchasing levels were diluted to some extent as other buyers stepped up and took advantage of the less aggressive approach from the big guns,” AWI said.

“As one or two companies dropped out, there were two or three that involved themselves more and by mid-week had inevitably created a strengthening market once again.

AWI said with just two weeks of auctions left to sell prior to the three-week break over Christmas and New Year, the 50,000 bales offering next week is sure to be greeted enthusiastically by exporters.

“The strange price pattern set last week has seemingly been proven to be an anomaly and the strong trend in play for years now is tipped to be pushed through to the sale break.”

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.


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