Wool prices climb higher with new orders as supply tightens

Sheep Central February 24, 2017

SOLID demand boosted by new business continued to push Merino and crossbred wool prices higher at auctions this week.

And prices next week are expected to remain buoyant, with bidding this week dominated by traders, rather than the market’s large Chinese indent buyers.

The Australian Wool Innovation weekly market report said it was widely expected that the large Chinese indent operators could ill afford to ‘sit out’ for too long, particularly in the quality Merino sector.

Positive Chinese economic data, mainly stronger house and real estate prices, also indicated “a belief of a sustainable wool price going forward is not beyond being a reasonable assumption”, AWI said.

AWI’s report said quantities of wool at auction are starting to show signs of waning, which is usual for this time of year. Just over 42,000 bales are expected to go to auction next week.

The Australian Wool Exchange Eastern Market Indicator this week lifted nine cents to 1449c/kg clean, with brokers passing in 5.6 percent of the 45,144-bale offering. The EMI in $US terms rose 3 cents to US1115 cents, with the $A-US exchange rate at US76.92 cents.

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Gap between fine and broader widens

AWEX senior market analyst Lionel Plunkett said the finer micron groups continue to appreciate at a faster rate than their broader cousins, causing the price differentials between microns to further widen.

“The gap between an 18 and 19 micron is now out to nearly 200 cents, as is the gap between a 19 and 20 micron, meaning the difference between every micron point in these groups is now 20 cents.

“Any price differences at the micron level are being largely driven by the quality of the selection.”

Mr Plunkett said better types continued to attract good support and maintained their large premiums over lower spec types — over-long, high cvh and poorly prepared wools.

“The heat seems to have left the skirting market and this sale it was again the poorest performing sector, generally unchanged for the week, with the exception of some better style 18 micron and finer lots which managed modest rises for the week.

“The renewed interest in the crossbred market continued this week with most types and descriptions adding a further 10 to 20 cents to the gains recorded last week and 26 to 28 micron posted the largest rises.”

Mr Plunkett said the oddment market also had another very solid week, with 20 to 30 cent rises in locks and crutchings helping push all three carding indicators to average rises of over 15 cents.

“The quickly diminishing offering of washing lambs (under 0.3pc vegetable matter) continue to attract extremely strong buyer attention and continue to be extreme.”

New wool orders daily

AWI said this week’s wool auction market started stable, was followed by a mid-week rise and a final day of consolidation.

“Prices remain in very high percentile bands across the entire Merino sector.

“Buyer purchasing intensity remains high, and reports of new business being written is a daily occurrence,” the AWI report said.

AWI said the Merino fleece market appeared to change track slightly this week as buyers’ attention moved more to the broader 18.5 to 21 micron area.

“With superfine wools finer than 18.5 micron now 200 cents and more dearer than their broader counterparts, interest from the predominantly Chinese traders turned to what looked like a more advantageously priced type.

“As a result, all types and descriptions 18 to 21 micron were a general 15 to 35c/kg clean dearer for the week,” AWI said.

“The finer wools were not neglected by any means and a 5 to 15ac clean/kg gain was extracted from buyers’ pockets for these wools.”

AWI said better skirting types finer than 18 micron with less than 4pc vm added 10-15c/kg.

“The price of these brokens/pieces and bellies are considered “too close” to the fleece price in a lot of cases.

“Given the lesser top yield produced, processors and buyers are now looking for some price relief to augment making tops at saleable levels on the spot and forward markets.”

Merino carding wool at record levels

AWI said washing type carding wools (scouring only and very limited vm, (under 0.3pc vm) were being bought “at best” in some instances and extreme price rises occurred, out of kilter with the rest of the consistent, but dearer, carding market. Merino carding indicators are remaining steadfast in record all time high price levels and are now sitting just short of 1200c/kg clean.

AWI said crossbred price gains of 15 to 30c/kg clean were well appreciated by grower sellers and was evidenced by the substantial reduction in the pass-in rates.

“Quite noticeable this week was that as the market strengthened further, the discounts of ill prepared clips lessened.

“The past week’s heavy discounting hammers home the clear signal that to extract every cent possible, clips must be prepared to a minimum standard of quality, otherwise when selling into a weak market, the penalties can be high.”

AWEX said a good selection of quality superfine wool under 18.5 microns is expected in Sydney in a designated superfine sale.

Click here to see the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.


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