AUSTRALIAN growers passed in almost a third of the wool offered at auction this week as prices fell further this week amid low market confidence hit by the China-United States tariff dispute and gloomy retail conditions overseas.
The benchmark AWEX Eastern Market Indicator fell 60 cents to 1833c/kg clean as Merino wool prices dropped 40-60 cents and crossbred lines were discounted by 100 cents-plus.
This prompted growers to pass in 28.2 percent of the 24,121 bale offering, despite the fact this was 9032 bales fewer than last week’s catalogue.
AWEX senior market analyst Lionel Plunkett said buyer confidence was very low, as exporters tried to see at what point the market would settle.
“Prices opened lower and then continued to fall as the sale progressed.
“By the end of the first selling day prices had generally been discounted by 40 to 60 cents,” he said.
“Due to a lack of quantity the Western region was reduced to a one-day sale.
“Selling last on Wednesday, the large reductions in price resulted in a pass-in rate of 48.7pc, this combined with the 10pc of wool withdrawn prior to sale, meant that only 41pcv of the original offering was sold to the trade,’ Mr Plunkett said.
“This was the lowest clearance rate in the West since 2003.”
Mr Plunkett said there were positive signs on the second selling day in the eastern centres, where only minimal price movements were felt.
“The EMI has now fallen by 119 cents over the last two weeks, a drop of 6pc.”
Crossbred wool prices crash lower
The crossbred sector sustained further large price reductions, after the substantial losses recorded last week.
“Weak buyer demand resulted in 26 micron through to 32 micron generally falling by 50 to 110 cents.
“After hitting a record level three weeks ago, the Micron Price Guide (MPG) for 28 micron has fallen by 219 cents over the past two sales, a reduction of over 14pc.
Market slide slows in late sales – AWI
Australian Wool Innovation’s weekly market report said signs of a slowing to the slide were witnessed by the close of selling.
“Global economic confidence has filtered through to the wool textile industry with the China – US tariff dispute and gloomy retail conditions in mainland China and Europe were cited as the major contributing factors.
“The ongoing impacts associated with the lifting of the South African wool import ban into China have largely been dealt with and accounted for, but still having a big effect on the market is the drought-affected wools the buyers are having to find a home for,” AWI said.
With the EMI in $US falling 49 cents to US1261c/kg clean, AWI said the fall of 7.6pc to the new level surely must have many mills interested in securing some guarantee of supply at the more advantageous prices available.
“Buyer focus this series was wholly focussed on the question of what price level to act?
“It was basically a given pre-sale that prices would again deteriorate, but a willingness to re-enter the market and cover off sold contracts by exporters also became apparent as these lower prices became a reality.”
AWI said the market’s underlying strength was still being questioned as the large Chinese indents were absent from buyers lists once more, but as prices weakened most other buyers all became more steadfast and willing in their purchasing intent, taking advantage of the lack of the usually strong competition from these major buyers.
AWI said on the Western Australian market 53.8pc of the Merino fleece and 44.3pc of the Merino skirtings types failed to meet grower reserves. In Sydney, 39.6pc of the crossbred types also failed to sell and were subsequently passed in.
“The only market sector which growers were happy to dispose of their product was in the oddment sector where relatively normal pass in rates occurred.”
AWI said the final day of selling this week showed a much better market.
“Whilst some price drop offs still occurred, these were largely restricted to the big offering of drought affected hard to place wools.
“The tone in which the auction was conducted in was significantly improved and the better edge of the Merino offering advanced back into positive territory by a small 10 to 15 cents,” AWI said.
“The Chinese top makers were a little keener and local traders and exporters appeared to use that, as well as a fear of supply and quality of that supply, as a lead to execute some of their short positions.”
South Africa has just two selling weeks left prior to their annual two month break in sales so a supply squeeze is on the horizon, but an injection of greater confidence and stronger demand is required, AWI said.
There are 31,462 bales rostered for auction next week, followed by just 20,000 bales the following week.
Click here for the latest AWEX Micron Price Guides.
But where is all this new demand that Australian Wool Innovation has created, according to their senior management? Were they just ‘fibbing’ or just dumb?