CONTINUED wool dumping and associated finance issues have pushed auction wool prices down further, with the Australian Wool Exchange reporting last week’s weaker buyer sentiment was carried forward.
“Last week the losses were minimal due in part to the weakening Australian dollar and without the fall in the AUD the market retractions would have been more significant,” AWEX said.
“This series currency movements were of no benefit to the market, and the AUD increased in USD terms compared to the previous week, compounding the effect on the falling market.
“From the opening lot of the series, it was evident that the market was in sharp decline,” AWEX said.
“In the eastern centres, by the end of day, the individual Micron Price Guides (MPGs) had fallen by between 6 and 99 cents.
“When news of these losses reached the west, many sellers opted out of the market, pushing the overall withdrawn percentage to 17.9 percent,” AWEX said.
“The market continued to fall and in Fremantle the MPGs lost between 45 and 61 cents.”
AWEX said the AWEX Eastern Market Indicator fell by 31 cents for the day, the largest daily fall in the EMI since August.
“The second day the market continued to fall but to a lesser extent, with some positive movements and signs evident, particularly in the west (selling last) where there was a noticeable rally late in the day.
“By the end of the day, in the east the MPG movements for merino fleece ranged between +3 and -45 cents, while in the west the movements were minimal, ranging between +5 and -14 cents,” AWEX said.
“The sharp losses pushed the clearance down across the country, as sellers were not prepared to accept the prices on offer.
“The national passed in rate climbed to 19.3pc, 6.3pc more than in the previous series, which also recorded losses.”
Fox & Lillie brokerage manager Eamon Timms said a backlog in Australia’s wool dumping system was creating cashflow issues for exporters and traders, with the two main packing and dumping facilities in Melbourne unable to clear for shipment each week the volume of wool being sold weekly.
“There is a backlog … if you can’t get it through and you can’t get it into a container onto a ship, you can’t get paid.”
This meant that bills of lading proving that wool is on ships could not be issued to trigger letters of credit necessary to release payments to exporters and traders, who then have to organise other finance or modify the level of business conducted to make future purchases.
Growers withdrew wool as prices fell – AWI
Australian Wool Innovation trading consultant Scott Hansen said as the prices fell this week, grower seller resistance became more apparent, and by weeks end, almost 20pc of the offering had been passed in, and another 8pc on top of that withdrawn prior to selling.
“The major hurdle at present remain the local logistics problems emanating from the Melbourne port which continues to hamper trade and therefore are adversely affecting wool prices.
“Demand for wool has been further curtailed for the time being by the apprehension across all global markets caused by failures and issues facing some within the banking sector,” he said.
“The subsequent stock and share losses, wildly erratic intraday forex rates and a number of economies raising interest rates once more to curb inflation all combined to set a very risky environment to trade.”
He said the largest Chinese top maker dominated the Merino fleece sector as it took advantage of the current lull in the market, particularly on some finer micron European specification sale lots.
“Their main competition in the sale room came from the traders who were very watchful initially and careful regarding types and volumes taken into their inventory.
“The traders very much left the price setting coming from the Chinese based outfits operating to offshore buying or indent type orders,” he said.
“In one bright spot for the largely poor outcomes of the week, the very best of the superfine Merino wools of finer than 19 micron attracted the similarly season-long stronger competition than other sectors and managed to retain their values.
“Purchasing was dominated by representatives of the Italian mills albeit with volumes of these superior wools being in very short supply,” Mr Carmody said.
“A similar auction scenario was witnessed on the crossbred wools as a large China indent dominated and price support came from local trade.
“Cardings also had comparable selling circumstances as the main manufacturer appeared at the top of buyers’ lists and again ably supported by dealers of these segments of the wool market,” he said.
“In both areas though, a more competitive market was apparent than their Merino counterparts.”
Next week’s national offering is forecast to be similar, there is currently 46,274 bales rostered.
Sources – AWEX, AWI, Fox & Lillie.
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