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Wool auction prices come under pressure again

Sheep Central, March 25, 2022

 

CURRENCY exchange rates and finance pressures impacted Australian wool prices this week, with the market recording its second consecutive weekly drop.

The Australian Wool Exchange said the national offering decreased by 2102 bales to 45,149 bales, but the passed-in rate increased to 16.9 percent, as growers reacted to hold back wool.

AWEX said there was strong buyer attention in better style types, although despite strong demand the prices being achieved were generally 10 to 20 cents below those achieved in the previous sale.

“There was 30.2 percent of the selection AWEX Style 4 or better (up 0.2pc), 42.8pc carrying less than 1pc vegetable matter (up 2.1pc) and 29.5pc recording a strength result of 40 NKT or better (up 3.1pc).

“Lesser style wool, wool carrying higher levels of vm and those with lower NKT results  — particularly those with mid-breaks higher than 60pc — did not attract the same levels of support and were generally 30 to 60 cents easier.”

AWEX said by the end of the series the individual Merino fleece Micron Price Guides (MPGs) across the country had reduced by between 21 and 46 cents, with the losses felt across the entire spectrum.

“These negative movements, combined with falls in the skirtings — prices for pieces and bellies generally fell by between 10 and 20 cents — crossbreds — the MPGs for 26-30 micron lost between 7 and 43 cents — and oddment sectors — the three Merino Carding Indicators dropped by an average of 20 cents — combined to push the AWEX Eastern Market Indicator (EMI) down by 24 cent to close the week at 1384 cents.

“This overall loss was not as severe as some observers predicted given currency movement,” AWEX said.

Due to a continually strengthening of the Australian dollar — the A$ added 1.76 cents compared to last week — and when viewed in US$ terms the EMI recorded an increase, adding US7 cents and closing the week at US1037 cents.

Strengthening dollars plays havoc with price — AWI

Australian Wool Innovation trade consultant Scott Carmody said the strengthening Australian dollar played havoc with prices at the wool auctions this week.

“The A$ was substantially dearer against all the major currencies and the subsequent foreign exchange (forex) rates available had immediate and negative impacts upon the local auction price levels.

“General losses of 30 to 40c/kg clean resulted on all types and descriptions.”

He said it was important to note that all prices expressed in those overseas currencies had appreciated in value week to week.

“Passed in rates hit the highest rates for quite some time as just 83.9pc of all wool offered nationally was ultimately cleared to the trade, confirming the trend that has appeared the past few weeks of growers holding onto their wool for a better price.

“The clearance rates did improve in Western Australia though, as a 20pc passed-in rate bettered the previous sale series,” he said.

“The Sydney crossbred wool sellers had a tough time again in achieving their price reserves which resulted in 32.8pc of bales offered failing to meet expectations.”

Mr Carmody said alongside the forex-induced downward pressure on prices, local traders had to finance more of the bales offered this week.

“The direct buying (via offshore-sourced finance) top makers and indent operators dropped off in their purchasing rates.

“The auction direction was therefore largely in the hands of forward-trader sellers, who took the opportunity to lock in a profits,” he said.

“Competition for both selling overseas and buying locally was weaker than normal and new business was available if finance allowed.”

Mr Carmody said 48,000 bales have been rostered to sell next week over three days.

“Pressure on the bank accounts of buying companies and exporters remain an important factor for price determination, just as logistics and forex rates also have a strong influence on the current market.“

Sources: AWEX, AWI.

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