AUSTRALIAN wool growers’ selling reserves kicked in as the auction market dipped again this week, with brokers passing in 17.6 percent of the 34,084 bales offered.
The softer buying trend dropped the AWEX Eastern Market Indicator down 39 cents to 1555c/kg clean. The EMI in US$ fell 37 cents to US1037c/kg.
AWEX senior market analyst Lionel Plunkett said after rising for two consecutive weeks, the sale series this week has returned to moderate falls.
“Selling last on the final day of the previous series, the Fremantle region recorded losses, as a noticeably softer tone became evident.
“This softer tone continued into this week, resulting in price reductions from the opening hammer in the Eastern markets,” he said.
“The medium microns were the hardest hit and by day’s end the individual Micron Price Guides (MPGs) for 19 micron and coarser fell by 28 to 45 cents across all three centres.
“On the back of these losses the AWEX Eastern Market Indicator fell by 24 cents for the day.”
He said the market continued to track downward on the second day of selling.
“The individual MPGs generally fell by a further 12 to 17 cents in the south and 20 to 50 cents in the north, pushing the EMI down by another 15 cents.”
Mr Plunkett said worth noting, in an inverse pattern to the previous sale, was that the Fremantle region selling last managed small price increases for the final day, generally between 5 and 10 cents, setting a positive tone for the following week.
“The price reductions have again been met with seller resistance.
“The national passed-in rate was 17.6pc, an increase of 10.8pc when compared to the previous series.”
Mr Plunkett said the crossbred sector also lost ground this series.
“The lack of buyer support for the poorly prepared lines, contributed to the MPGs for 26 micron through to 30 micron falling by 27 to 49 cents.
“The three Merino carding indicators fell by an average of 29 cents.
“These losses were mainly driven the 40 to 50 cent reduction in the price of locks,” he said.
Slowing of prompt demand is a concern – AWI
Australian Wool Innovation’s weekly market report said a slowing of prompt demand once again was the primary concern for exporters.
“The holding of any significant volume of wool remains high risk for buyers as grower stocks are higher than previous seasons.
“A very cautious approach to buying was taken by almost all purchasers from the commencement of selling this week,” AWI said.
“In juxtaposition to others, one leading buying house was keen to cover on the first day as prices went to their favour, but their appetite lightened off on the second day, producing further falls which allowed others into the market.
“Not surprisingly, as more buyers participated, the market recovered, and to such an extent that the western Australian market in Fremantle outperformed their eastern counterparts,” AWI said.
“Wool values in the west closed at levels 15 to 30 cents above that of Melbourne and Sydney selling centres.”
AWI said the western Australian market is perhaps a better barometer this week, as their indicator fell just 25 cents or 1.5pc, with more than half of that drop being attributed to the foreign exchange (forex) rate changes.
“In what has become the status quo of the current market, as prices fell, the passed-in rates increased exponentially.
“Seller resistance of this nature has not been seen for quite some time, but a cursory look would see that strategy as a positive for the health of the market”.
AWI said the strength of competition was just not there this week to justify an unchanged market price and growers selling had a firm price set and clearly were not willing to compromise.
“In most cases they were unwilling to negotiate a lower return post auction and buyers had to advance to the reserve or leave.
“Wool growers are more acutely aware of the current (and forecast) supply of raw wool than most, so deciding not to sell at lower rates could be a good lead for users,” AWI said.
The latest figures reveal that 406,875 bales have been sold through auction so far this season. At the same point last season 2018/19, 521,939 bales or around 22pc more volume had been moved into the supply chain, AWI said.
“The 2017/18 season saw 646,907 bales having being sold by week 19 which is a cumulative 37.1pc higher volume in just the three-year period.
“There are just six weeks of selling left until the Christmas recess,” AWI said.
With 38,497 bales due to be offered in Sydney, Melbourne and Fremantle next week, the market direction will be decided by the balance of the relatively large volume for sale versus a strong Fremantle finish to this week, AWI said.
Click here to see the latest AWEX Micron Price Guides.