Markets

Wool auction prices slump despite smallest bale offering in 12 months

Sheep Central, June 10, 2016

Wool sales Landmark1 MelbourneFINE wool prices fell by up to 45 cents this week, despite brokers offering the smallest catalogue in 12 months.

The AWEX Eastern Market Indicator fell a further 26 cents to close at 1270 c/kg clean with brokers passing in 13 percent of the 27,231-bale offering.

AWEX senior market analyst Lionel Plunkett said the currency appeared to be an influencing factor as it briefly hit US75 cents, an increase of 2 cents compared to last week. In $US terms, the EMI rose 9 cents to 948c/kg.

“Currency traders highlighted strong global commodity prices and general US dollar weakness as elements of the lift in the Australian dollar,” Mr Plunkett said.

“The trend was lower from the outset and prices fell as much as 40 cents on the opening day.

“Thursday was mixed, with Melbourne continuing to drift lower whilst Sydney was only marginally cheaper and even managed to eke out small gains in some microns.”

He said finer microns were the hardest hit during the week, particularly part-tender and less stylish types.

“Conversely, the limited average spinners’ types continued to attract good competition and were largely in line with the previous sale.

“Less than 45pc of the Merino fleece sector was in the highly sought after 1pc vegetable matter (VM) and lower range, which was the lowest percentage for the season.”

Mr Plunkett said prices for Merino skirtings were trimmed back, but the reductions were not as significant as those in the fleece catalogue. The lower VM types continued to attract strong demand.

Crossbred wools lost 20 to 30 cents for the week on limited volume, he said.

“Merino cardings were also cheaper for the week, losing 20 cents.”

AWI says it was all about the dollar

The Australian Wool Innovation weekly wool report said the market this week could be described as being “all about the dollar”.

“Local wool grower sellers generally don’t take too kindly to hearing incessant citing of forex rates for explaining market movements, but these rates are a reality and a significant factor in the pricing of wool.

“Negativity exuded pre-sale from exporters as the $A strengthened remarkably,” the report said.

“The reasons for this gusto is probably best known to currency traders, but apparently the extravagant movements were due to a weaker $US rather than a robust $A.

“Various factors such as low jobs growth and lack of an interest rate rise in the US, and an unchanged interest rate decision in Australia, were all cited as the predominant determining influences.”

AWI said Merino fleece buyers were highly reactionary in the prices paid, particularly for wool types mainly suited to specific Chinese delivery. The better quality of all micron bands were more sought after and showed just 5 to 10 ac/clean kg losses.

“These better sale results were restricted to the FNF (less than 1pc vm) sale lots.

“The second day saw a much stronger market and stronger competition appeared to be returning with surprising reports of fresh business being written overnight despite the CIF US prices being the same to slightly higher,” AWI said.

“Most exporters saw the market closing on a firm unchanged basis.”

AWI said exchange rates will partly determine outcomes next week with Fremantle again selling wool, “but the tightening global wool supply may well eventually overrule and reverse the price sentiment to the positive”.

Fremantle returns to the selling schedule next week, bringing the total national offering to almost 35,000 bales.

Click here to see the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.

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