Wool prices rise as top makers and traders compete

Sheep Central, July 5, 2019

STRONG competition between the Chinese top makers and local Australian-based traders created a minor lift in the wool auction market this week.

Prices rises in all the Merino micron categories led to the benchmark AWEX Eastern Market Indicator rising 8 cents to 1723c/kg clean, as the $A-US exchange rate rose to US70.37 cents.

AWEX senior market analyst Lionel Plunkett said after the AWEX EMI suffered its second largest monthly on record in June, to finish the 2018/19 season in a very negative fashion, industry observers were very keen to see what tone would be evident in the first sale of the new season.

“The Week 1 sale is traditionally one of the larger sales for the year, as sellers waiting for the new financial year take the first opportunity.

“However, due the sharp decline of the previous month the national quantity was only 30,994 bales,” he said.

This was a reduction of 12,889 bales compared to the opening sale of the 2018/19 season, a fall of 29.4 percent and the smallest offering to commence the season in AWEX history — since 1995.

“Although the EMI recorded a small 5 cent loss on the first day of selling, the overall tone of the market was positive, with the market showing strong signs of improvement.

“The Fremantle sale, which is the last to sell recorded upward movements, was reflected in the Western Indicator adding a healthy 16 cents on the opening day,’ he said.

“The rises experienced late on day one, were quickly realised in the Eastern centres on day two.

“The individual merino Micron Price Guides (MPGs) generally rose by 10 to 30 cents for the day, pushing the EMI up by 13 cents,’ Mr Plunkett said.

“By the end of the series the EMI had added 8 cents, closing the week at 1,723 cents.

“Although the increase in the EMI was small, the importance of the rise was large, as the long run of losses was finally brought to a halt.

All types except crossbred gained value – AWI

The Australian Wool Innovation weekly market report said nearly all types and descriptions of offer gained value and generally by a minimum of 20c/kg clean. \

“Whether or not this is a trend that is changing remains to be seen, but sentiment has clearly moved from gloomy to buoyant in the space of just the one week.

“Confidence is key to the wool market’s fortunes and that is present at the moment, but conversion to fresh forward business in volume needs to be achieved for a complete stabilization of the supply chain,” AWI said.

AWI said current forecasts see wool production levels falling a further 4.4pc for next season, but this will be re-evaluated in early to mid-August when the Australian Wool Production Forecasting Committee next meets.

“Many wool selling brokers are already on the record stating that that figure is likely to be well short of the decline in the current clip, with early shearing and drought continuing to cloud the real drop-off in supply they are seeing in wool producing regions.”

AWI said wool auction market activity this week witnessed strong competition between the Chinese top makers and local Australian based traders.

“Indent buying by the two big guns from China has not returned to normal and both those companies sit outside the top positions of buying lists, where they usually reside.

“It is unclear if the stronger buying intent from almost all traders is from the covering off of old sales or is indeed a pre-cursor to renewed buying interest from our overseas manufactures.”

Next week’s auctions will be the last before a three-week recess, with 34,831 bales scheduled for sale. Auctions will then resume in the week commencing 5 August.


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