WOOL prices strengthened into record territory again this week, with significant gains for quality Merino and crossbred fleece.
The AWEX Eastern Market Indicator improved another 15 cents to 1437c/kg clean, despite a $A-US exchange rate of US76.25 cents putting the EMI in $US at 1096 cents, up US9 cents.
Australian Wool Innovation said in a week which the millionth bale for the season was sold on Wednesday, the AWEX EMI’s close was its highest week-ending level since the commencement of AWEX market reporting responsibility in 1994.
With continuing strong demand from China, Europe and India, brokers passed in 6.7 percent of the 44,484-bale offering.
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AWEX senior market analyst Lionel Plunkett said superfine types led the way with the designated superfine sale in Sydney, with the buyer focus on micron.
“Generally 19.5 and finer were 25 to 50 cents dearer with some better style 17.5 and finer types recording lifts of over 80 cents.”
He said 20 micron and coarser wools also performed well, but buyers were more selective, focusing on the high strength low cvh lots.
“The large rise in the finer microns has helped push the micron price differential out further, the difference now between an 18 and a 21 micron (wool) is out to over 500 cents.”
Mr Plunkett said the stylish selection helped the crossbred market reverse its recent trend to record gains this week.
“Price rises were predominantly in the 25 to 28 micron range with general increases of between 5 and 15 cents, 30 micron and coarser struggled to achieve the same support and were slightly cheaper for the week.”
Mr Plunkett said the skirtings market followed a very similar pattern to the fleece, with buyers chasing micron.
“Some better style 17 micron and finer skirtings were extreme and in many cases over 100 cents dearer for the week.
“Generally prices for 19.5 micron and finer were 30 to 50 cents above those achieved at the previous sale, with the better style/spec lots enjoying the largest gains.”
Mr Plunkett said the oddment market had modest gains for the week, with carding indicators gaining an average of 5 cents. A limited selection of washing lambs (<0.3); however, were highly sought after and experienced gains of 30 to 50 cents, with again the finer microns posting the largest movements.
European order strength was intense
AWI said the Merino sector was again the main recipient of the spot buyers’ willingness, or rather, necessity, to pay more.
“The strength of the European orders in the rooms was intense and the better specified finer lots were heavily targeted and bought at ever increasing levels.
“Pleasingly the crossbred and comeback type segments also recorded a bounce by the end of the week, making it a very good selling week for growers of all wool types,” AWI said.
AWI said the Merino sector of the market was dominated by the strong movements upwards of all types finer than 19 micron suitable for the Italian processing industry.
“The main Italian indent buyer took to the speciality sections of the wool sale catalogues with gusto, not only in the designated super fine sale at Sydney, but also the available in Melbourne.
“Targeting traditional crimping, best style and strength best top making and spinners’ types, the first day saw the Italian operator out-gunned on some lots by traders, probably covering forward sales to that same destination and to a lesser extent India,” AWI said.
“The second day saw a larger offering of the traditional wool types and the Italians were rarely beaten on anything they bid on.
“This interest in this wool description must be very pleasing for those growers who have kept the faith in growing that specialty wool type.”
AWI said traditional wool types are extracting healthy premiums at auction and in some super and ultrafine micron brackets this equated to from 200c/kg to nearly 500c/kg clean premiums being paid above the market. The burry (2.5pc vm plus) fleece of all microns continue to surprise buyers expecting a fall and all descriptions actually met better competition and gained 25c/kg.
AWI said a good reversal of fortunes was received this week on the comeback and crossbred market finer than 30 micron.
“Prices stabilised early in selling but appreciated strongly on the final day to gain 15-20c/kg clean.
“These price rises were mainly restricted to those wools correctly prepared, with most un-skirted lots (d-certs) being critically valued by buyers and as such receiving discounts, which were considerable in some cases.”
Have crossbred prices bottomed?
Rodwells wool manager Michael de Kleuver said crossbred wools found a level this week.
“They’re finding a bottom at this stage, with a few less crossbred about and obviously just a little bit more interest, so we’ve had a little bit more increase off the bottom.”
Mr de Kleuver agreed crossbred buyers were still looking for good quality first cross or Corriedale type clips.
“There was a distinct difference between well-prepared crossbreds and the others.
He said non-skirted, unclassed composite-bred clips, poorly prepared or classed, are getting severely discounted. Crossbred prices are generally well below levels of 12-18 months ago, but there was a distinct difference in competition for well-bred and prepared clips “and the rest”. The well-bred and classed crossbred clips are making fair value each week, but the others were being offered a few times before being sold despite being valued lower.
“Sometimes people are bidding 100 cents below what you think they are worth.”
In the Merino market, Mr de Kleuver said the superfine sale in Sydney helped set values.
“But anything that was remotely close to specification was very, very well looked after.”
Mr de Kleuver said the market was staying despite slightly more fine wool on the market than has been offered in the last few weeks of last year and the first few sales this year.
“When the market is very strong like that, as brokers, we should be offering wool, because when it is going up 50 cents a week it tells you demand is outstripping supply.
Current prices levels are sustainable
Director of wool exporter PJ Morris Wools, Peter Morris, believed the current price levels were sustainable.
He expected prices going forward would be within 10-15pc of the current levels, “up or down”, with huge production increases not forecast in the next few years.
“I think if they could stay here, I think it is sustainable – I think at these levels it is not too bad for the amount of wool we’ve got coming onto the market.”
The market had been quieter before Chinese New Year and during the holiday period last week, but there was still a need for the wool and clients were needing prompt shipment.
“So there is a willingness to keep on buying.
“I think that generally we are in a situation where probably supply is probably a little bit smaller than demand and it has just made the market quite buoyant,” he said.
“We’re not thinking there is going to be too much of a downside subject to the world economy and the issues that we have in America and trading agreement with China – I think you’ve got to be cautiously optimistic at this stage.”
Mr Morris said all markets were looking for wool.
“It’s not one particular area – they are hand-to-mouth in Europe so they’ve got to continue to buy, there is Indian enquiry and they are probably behind and they’ll have to continue to purchase and maybe increase their purchases.
“The main market, of course, being China, there was not a huge amount of top stock available and not a huge amount of greasy wool up there, so they’re going to have to keep replacing” he said.
“I just think we are in a nice little sweet spot at the moment and I don’t expect any major swings for the next season, subject to something out of our control.”
Mr Plunkett said the market gains have enticed more sellers to the market, increasing the national quantity to over 47,500 bales for next week, about 12pc higher than was advertised last Friday.
AWI said such a volume is usually a test of the market’s resolve, but the current sentiment suggests that there is quite a bit of covering and forward buying left to complete, so positivity should greet the start of the week.
Click here for the latest AWEX Micron Price Guides.
Sources: AWEX, AWI, Rodwells, PJ Morris.