Wool price rise for big offering catches exporters by surprise

Sheep Central, November 13, 2015

wool bales dec15-14WOOL prices surged this week, pushing the AWEX Eastern Market Indicator to a level more than 200c/kg clean better than 12 months ago.

Prices lifted up to 30 cents during the week, with the AWEX EMI finishing on 1251 cents clean, up 17 cents, and only 4.9 percent of the offering was passed-in.

With Australian dollar trading at US71.47 cents, the EMI in US$ terms closed on 894 cents, up 11 cents.

AWEX senior market analyst Lionel Plunkett said almost 50,000 bales had been predicted for sales this week, but 46,896 bales were catalogued for the second largest offering this season.

“It was a soft start to the week when Melbourne sold in isolation on Tuesday and prices were generally in buyers favour, easing 5 to 10 cents for most descriptions,” he said.

On Wednesday, those movements reversed and the day looked to be closing back at similar levels to the previous Thursday.

“The east coast had only firmed by a few cents.

“However, late in the day Fremantle outperformed those results by another 10 cents at its one-day sale, giving a signal for possible further improvement on the final day,” Mr Plunkett said.

“That proved an accurate barometer, when Thursday opened to a much more buoyant atmosphere.

“In the early stages prices were as much as 30 cents dearer,” he said.

“However, the exuberance moderated over the sale and the day finished a more manageable 20 cents higher.”

Mr Plunkett said sale lots with a low CVH (coefficient of variation of hauteur, a predicted measure of length variability in processed wool) came under the spotlight given their low numbers.

“If the season follows typical patterns then numbers of these types should start to increase towards Christmas.”

Mr Plunkett said prices for Merino skirtings also made a sharp jump on the final day, finishing the week around 30 cents higher. Best length low vegetable matter content types recorded the best performance.

Crossbreds had mixed results; the finer types (25/26/27 microns) were patchy with most support noted in the 28-32 micron range, he said. The Merino Carding Indicators recovered most of their losses from last week, finishing the sale 5-15 cents higher.

Market strength a shock to exporters

Australian Wool Innovation’s weekly wool market report said the strength of the market this week, particularly in the Merino fleece sector, reportedly came as a shock to many exporters and overseas users.

“Most of these interests believed the sharp 80 cent rise of two weeks prior had to be adjusted further downwards similar to last week, but this was far from the result,” the report said.

“When Sydney and Fremantle joined the selling on Wednesday, a swelling of interest became apparent and the cheapening tendency evaporated quickly.

“Buyer confidence grew each hour and, as the week progressed further, more of the exporters put the foot down at various times to short cover their outstanding commitments against stiff competition from indent buyers,” the report said.

The AWI report said many trade participants quoted the rises on Thursday in the Merino fleece sector as larger than the published indicators.

“A general rise of 25 to 40ac/clean kg on all Merino fleece was recorded with some of the lower quality edge of types gaining more as buyers scrambled for “anything cheap”.

“Intense interest remains on the lower CVH and PobM sale lots, particularly in the super fine bracket.”

About 45,000 bales are on offer next week.

“The strength of competition at the close this week will most likely see strong early buying activity before buyers can reassess their positions and make a judgement of likely price levels to be seen prior to the upcoming Christmas recess in selling in a month’s time,” the AWI report said.

Sources: AWEX, AWI, Landmark


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