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Wool prices strengthen with currency changes

Sheep Central, May 13, 2022

STRONG demand and favourable currency valuations have helped the Australian wool auction market record overall gains for the third consecutive week.

The Australian Wool Exchange said all sectors of the market sold at higher levels than in the previous week, although the passed-in rate rose 3 percent to 9pc.

“Although this time of year quantities traditionally start to decline as many farmers begin their yearly cropping programs, wool continues to flow onto the market.

“This week there was 41,298 bales on offer nationally, 1145 more bales than in the previous week,” AWEX said.

“Widespread strong competition helped to push prices higher across board, as buyers fought hard over the wool on offer.

“Although again main buyer interest continued to focus on the higher yielding — higher than 63pc dry — lower vegetable matter types — less than 1.2pc vm — of all types and descriptions recorded rises, as buyers attempted to secure quantity in the rising market.

“By the end of the week, the individual Merino Price Guides (MPGs) for Merino fleece had risen by between 8 and 69 cents,” AWEX said.

These rises combined with solid increases in the skirting, crossbred and oddment markets resulted in a 26-cent rise in the AWEX Eastern Market Indicator to 1427 cents/kg clean.

“Currency is often mentioned as a driving force in market movements for Australian wool, predominantly as the bulk of Australian wool is traded in US dollars.

“This week, currency had a profound effect as the A$ dropped below US70 cents for the first time since late January,” AWEX said.

“The last time the A$ was lower was a further 18 months back.

“The reduced A$ meant buyer purchases in US$ represented good value compared to last week’s prices,” AWEX said.

This was reflected when viewing the EMI in US$ terms, with the EMI actually losing ground in US$ terms by US3 cents, closing the week at US994 cents.

India, Europe and China all buying – AWI

Australian Wool Innovation trade consultant Scott Carmody said the substantially weaker Australian dollar against the US dollar and Euro provided almost all of the entire average market value gains.

“As has been the case since the New Year, demand remains remarkably stable as witnessed by the steadier prices when converted to US$.”

He said EMI closing almost 2pc higher again at 1427 c/kg clean is just 22 cents short of the season high A$ price.

The US$ EMI shifted slightly (-0.4pc) lower due to the advantageous forex rates available in that currency and closed at US992c/kg, Mr Carmody said.

“The Western Market Indicator appreciated 2pc to jump over the 1500-cent mark to conclude sales at the 1502c/kg clean level.”

Mr Carmody said there has only been a slight drop in activity over the past month from China, due to the logistics and ongoing pandemic management issues currently being dealt with in that nation.

“Despite this softening, other significant users from India and Europe have stepped up their operations and are seemingly recovering towards near pre-COVID levels of operation.

“This is particularly evident with the competition being seen on sale lots with better specifications,” he said.

“This is mainly on, but not limited to, the wool that has better characteristics of style and strength and lower levels of vegetable matter (vm).”

Mr Carmody said most sections were extremely active in purchasing this week, with Chinese indents and one of the major Chinese top makers providing stiff opposition to the largest traders.

Next week’s sales have increased in volumes due to the price gains making offering wool a more attractive proposition to growers holding wool in store. Next week the national offering increases, with 46,129 bales currently expected to be offered.

Click here for the latest AWEX Micron Price Guides.

Sources: AWEX, AWI.

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