AUSTRALIA’S wool market has defied gravity and the developing impacts of China’s coronavirus outbreak to move upward this week, buoyed by strong demand for lines with good specifications.
AWEX senior market analyst Lionel Plunkett said the auction market has defied expectations and recorded overall positive movement.
“Many in the industry predicted that continued global uncertainty over the coronavirus outbreak, would push the market lower.
“However, these predictions did not come to fruition, as the market opened strongly and then continued to strengthen as the series progressed.”
Mr Plunkett said the main buyer interest was in finer wools and broader better style types, in particular those with favourable additional measurement results.
“These wools generally sold at levels 40 to 80 cents above those achieved at the previous sale.
“Lesser style inferior types and those with poor additional measurement results did not attract the same buyer attention and lost ground for the series, generally between 10 and 20 cents,” he said.
“The gains in the better wools was enough to push the individual Micron Price Guides (MPGs) higher for the week, with gains across the country of between 20 and 74 cents.
“On the back of these rises the AWEX Eastern Market Indicator (EMI) added 29 cents for the week, to close at 1577 cents,” Mr Plunkett said.
“The EMI has now risen for three consecutive selling days, adding a total of 57 cents over this period.”
Mr Plunkett said the skirtings also recorded rises for the series, all types and descriptions generally gaining 40 to 60 cents for the week.
“The crossbreds also managed general increases of 4 to 17 cents, the only MPG to record a negative result across the entire sale was the 26 micron MPG in Melbourne, which fell by 4 cents.
“Not to be left behind, the oddment sector also pushed higher, general increases of between 5 and 20 cents helped the three regional indicators to rise by an average of 11 cents,” he said.
European and Chinese top makers set auction pace
Australian Wool Innovation trade consultant Scott Carmody said expectations of a wool market ravaged by the turmoil caused to China’s working environment by the growing coronavirus outbreak were quickly extinguished though with strong European interest – Modiano — met by a tenacious purchasing appetite from large Chinese top maker, Tianyu.
“The radical change to a more confident sentiment that became apparent at the end of last week’s selling continued into this week from the opening hour of selling onward throughout selling.
“In what should be a good indicator of the markets potential to stabilize and perhaps further improve, is that the two major influences on pricing this week were first stage processors,” Mr Carmody said in his weekly AWI market report.
“As these two entities accumulated quantity, it wasn’t long before the local trading houses took the affirmative lead that those two influential operators provided and upped their own buying rates accordingly.”
Mr Carmody said the market was given some stimulus by the $US v $A foreign exchange (forex) rate trading under the 0.67 level earlier in the week.
“The Australian dollar is normally included in an Asian region currency bundle and it was this basket that came under pressure against major currencies.
“It was mainly foreign investors that pulled their money out of those $A investments upon fears that the China coronavirus will stifle growth and therefore potentially dampen investment returns,” he said.
“The Reserve Bank of Australia’s (RBA) decision to maintain interest rates helped push that rate back into the 0.67’s as the week progressed.”
Mr Carmody said consistent with their season-long approach, grower resistance to price acceptance was still evident, with more than 10pc of the original offering withdrawn from sale prior to auction and a subsequent 14.8pc being passed in after failing to meet the vendors’ reserves.
The national offering increases next week. Currently, there are 42,932 bales rostered for sale, with all three centres aiming to sell. Melbourne will sell over three days to accommodate the extra quantity.
Wool market is defying gravity
Fox and Lillie brokerage manager Eamon Timms said most of the movement in price this week was for wool of good specifications.
“People need the good spec wools, though it (the market) is defying gravity for it to do that.
“As resilient as it is, it has taken people by surprise.”
Mr Timms said selling wool into China is still quite challenging, ‘but then you some of the indents out of China and it is fairly active.”
Mr Timms didn’t believe the actions of several brokers to extend their prompt payment and storage periods had any impact on the market. Sheep Central has not been advised that the three major brokers, Elders, Nutrien Wool and the Australian Wool Network have changed their payment and storage conditions.
Click here for the latest AWEX Micron Price Guides.