WOOL prices improved further this week, giving weight to the long-held belief of a relative global shortage of suitable greasy wool in front of machines or in stocks, Australian Wool Innovation said.

The AWEX Eastern Market Indicator rose 23 cents to 1320c/kg clean as the $A-$US exchange rate rose US0.85 cents to US75.24 cents.

With brokers passing in just 3.8 percent of the 39,152 bale offering, AWEX senior market analyst Lionel Plunkett said it was an enthusiastic start to the 2016-17 wool selling season — the best start to a season in 11 years.

“The increase comes on the back of rises during the preceding auctions, extending the rally to four weeks and pushing the EMI to a 12-month high.

“The broader microns continued to be the focus and largely carried the market higher this week.”

Mr Plunkett said the progressive rises over the two selling days resulted in 21 micron wools jumping almost 50 cents clean for the sale, approaching 1500 cents clean. The 21 micron category briefly hit 1500 cents in June 2015, but the most notable recent encounter at this level was in 2011 and the record for any 21 indicator is 1682 cents back in 1988, he said.

“The superfine sector was more variable during the sale; lower spec types advanced more slowly while stylish/40Nkt types found renewed support on the final day and their rises were in line with the broader categories.

“The strength for Merino types was despite an almost one-cent jump in the Australian dollar, magnifying the rises in US dollar terms.”

In contrast to the healthy Merino market, Mr Plunkett said the crossbred wools continued to track lower, falling 20 to 30 cents for the sale.

“Merino skirtings firmed slightly for the week, as did the Merino Carding Indicators, which made modest improvements totalling a few cents for each region.”

Price gain indicative of support for Merino prices

The Australian Wool Innovation market report said the relatively large offering of around 40,000 bales failed to dampen the enthusiasm of buyers or the continued demand for Australian wool. The gain in the EMI when expressed in $US is highly indicative of overseas users willing or having to support the Merino market at current price levels, AWI said.

“Pre-sale expectations from the auction participants were largely in line with the eventual sale results.

“Widespread enquiry for new business, mainly China, India and to a lesser extent Europe, had warned the exporters of a dearer market on its way for the Merino fleece segment,” the report said.

“It was not an over-abundance of quantity that was being sought, but the fact that there were numerous users needing prompt or close in shipment, giving weight to the long held belief of a relative global shortage of suitable greasy wool in front of machines or being held as stock.”

AWI said with the uncertainty of the global retail economy continuing, this hand-to-mouth operational strategy is likely to continue.

“Overseas manufacturers are seemingly reacting to orders once received, rather than using favourable stocking opportunities when prices are in a lull, so such buying risk is usually now being left to the more adventurous local traders and exporters.”

AWI said very strong buying from three large Chinese indent buyers ensured the market was dearer throughout, with most of the pressure applied upon the 19- 22 micron wool types.

“Forward sellers appeared to be well-covered and mostly just bought to advantage against the indents to supply their clients with any prompt lots needed prior to the recess.

“A slight weakness appeared towards the end of selling as the quantities for next week came through as being near 20pc more than what was forecast just six days earlier.

Almost 41,000 bales will now be offered for the final sale prior to the annual three-week recess.

“It is anticipated that the current interest in the Merino fleece offering will continue and prices to remain solid, if not dearer.

“In all other sectors a slight drift lower is expected as outstanding orders are filled, and buyers not willing to carry stock over the break,” AWI said.

“A satisfying end to the wool selling “year” is widely expected, with little change to the positive sentiment.”

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.