Markets

Wool prices lift as buyers re-enter the market before Easter

Sheep Central, March 18, 2016

Wool sales Landmark1 MelbourneWOOL prices firmed slightly this week as buyers re-entered the market to fill orders prior to the traditional low supply period of April-May.

AWEX senior market analyst Lionel Plunkett said there was a turnaround in sentiment this week with the AWEX Eastern Market Indicator, closing four cents higher — the first gain after seven consecutive daily losses over more than three weeks.

The AWEX EMI closed on 1227 cents clean, with the $A exchange rate rising US1.14 cents during the week to US75.97 cents. The EMI in US dollar terms lifted 17 cents to US932 cents. Brokers passed in 5.8 per cent of the 38,842 bales offered.

In a staggered start between the selling centres, the small Sydney sale initially opened weaker, Mr Plunkett said.

“Enthusiasm increased over the day however, with Melbourne firming 5 cents, and Fremantle lifting 10 cents late in the day.

“It was a mirror image of that pattern on Thursday however, with a strong start losing momentum over the day.”

Mr Plunkett said the east coast still managed increases for the day, but Fremantle lost ground.

“The irregularity came on the back of a sharp bounce in the Australian dollar which jumped US1.6 cents the previous night.

“Although there were some losses over the two days, the net result still mostly favoured the positive side of the ledger,” he said.

“Prices closed 5 to 10 cents higher when compared with the previous sale with Melbourne receiving the biggest advantage.

“A strong start pushed Merino Skirtings slightly higher for the week.”

Mr Plunkett said crossbred results were mixed; cheaper in Sydney, but dearer in Melbourne despite a weak final day.

“Cardings also had varied results although the movements compared to the previous week were minimal.”

More equilibrium between supply and demand

Global Wool Export managing director Stephen Hill it was a good solid “slightly rising” market this week.

“It was really only 10 Australian cents dearer (for most Merino wool).”

He said the Australian dollar is on an amazing rally against the US currency and in US dollars wool is much dearer. However, he said demand in recent years has been “hand-to-mouth”.

“So there is not a lot of stock in the pipeline, so people can’t wait long anyway.

“If the prices look high definitely customers can wait a week or two before they place orders again, but they can’t wait long, so there is this continual reasonable demand,” he said.

“I think there is more or less equilibrium between supply and demand.

“People buying this week would have been buying for business that would have been written halfway up the rise of the Australian dollar, not this week, so there is a lag,” Mr Hill said.

“In saying that the market you can see is up in Aussie cents is in reasonable deciles and demand is quite solid, quite consistent, it still bodes quite well.”

Mr Hill said the market was about to run into what is the traditionally lowest supply period of the year.

“I think exports are wary of that.”

Physical auctions will cease for a week for Easter, but Mr Hill said in April-May there is usually less wool available nationally. With reports of shearing being brought forward this season and the forward bale forecasts, there is a potential for even less wool available in April-May this year than in 2015, he said.

“So there is a bit of concern there, because there is not much wool in the pipeline in general, so people have to keep buying and don’t want to get caught short I guess.”

Mr Hill said the only area with a “tiny bit of weakness” was crossbred wool, with reduced demand due to fashion changes.

“A lot of that product has been substituted by man-made fibres in recent times because of how cheap they are.”

Just over 48,000 bales are expected next week, the largest sale since early January, and the final sale before the annual one-week Easter recess.

Source: AWEX, Global Wool Export.

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