AUSTRALIA’S wool auction market moved substantially down this week, with the main price benchmark dropping 45 cents.
The Australian Wool Exchange said in the first week after the annual three-week mid-year recess, the market recorded substantial overall losses, although there were positive signs evident in the second half of the week.
“This sale is traditionally one of the largest of the season, as wool accumulated over the break makes its way to market at the first opportunity.”
“This week there were 55,363 bales on offer — up 8 percent – and brokers reacted to price levels by passing in 22.1pc.
“As the market opened, buyers were very cautious in their purchases.
“This caution caused the market to fall form the opening lot and continue to fall as the day progressed,” AWEX said.
“By the end of the day, general losses in the Merino fleece types of between 5 and 100 cents pushed the individual Micron Price Guides (MPGs) down by between 5 and 98 cents.
“These losses combined with falls in all other sectors pushed the AWEX Eastern Market Indicator (EMI) down by 37 cents for the day,” AWEX said.
“The second day of selling the market settled in parts, as buyers were more confident in price levels.
“The Merino fleece MPGs movements across the country were varied, ranging from -50 to +24 cents.”
AWEX said the EMI dropped by a further 7 cents.
“On the final day of the series the market finished on a reasonably positive note, with only Melbourne in operation. The market recorded only minimal price movements and the EMI dropped by the smallest of margins.
The EMI finished the week 45 cents lower, closing at 1342c/kg clean.
AWEX said due to a strengthening of the Australian dollar, when compared to the US$ the A$ has gained 3.16 cents since the previous sale in July.
When viewed in US$ terms, the EMI recorded positive movement. The EMI added US12 cents for the series.
It was all about currency and volumes – AWI
Australian Wool Innovation trade consultant Scott Carmody said the opening week of the Australian wool auctions’ ‘new season’ was all about currency and volumes.
“The pent-up supply due to the three-week recess was seen as an impediment to positive market outcomes, but far more relevant to wool pricing was the vastly improved and more expensive Australian dollar (A$) compared to the US dollar (US$) and Chinese renminbi (CNY).
“These two forex rates – when paired against the A$ – were almost 5pc stronger than the closing basis of the last auction sales held in mid-July.
“So whilst it may seem strange, by falling by 3.2pc this week, the market actually outperformed against expectations,” he said.
“A far worse result could have resulted – and was forecast by many – given the reality that wool is predominantly traded in these foreign denominations converted to A$ for local auction purchasing.”
Mr Carmody said large offerings were available this week, but this was to be expected and is quite normal for the first sale back from the annual winter recess.
“What was of some concern for buyers and exporters on the supply side though was the fact that August is typically a difficult trading and buying month and the first three weeks this season had forecast an offering of just short of 150,000 bales compared to the 110,000 bales of last year.”
He said similar negative AUD price outcomes occurred this time last year when the market lost 56c/kg clean (-46 cents this week).
“However, the market differed this year by having US$ values hold up and in fact improve (+11US cents) whereas last year saw US values drop US55 cents.
“Additionally, this year had a relatively strong clearance rate of 77.9pc compared to just 66.8pc sold to the trade last year, so some strong demand pointers emerged from the adverse ac prices paid this week,” Mr Carmody said.
The largest Chinese top maker, Australia’s leading local manufacturer and the local traders dominated Merino wool and oddment buying.
Europe’s largest processor dominated the crossbred sector, with solid support from all other market sectors and destinations.
Next week’s national offering remains large as the backlog of wool continues to flow onto the market. Currently, there is expected to be 49,338 bales on offer.
Sources – AWEX, AWI.