Trade

Wool prices surge to four-year highs as supply drives demand

Terry Sim, May 29, 2015

wool bales dec15-14Australian wool prices surged again this week to four-year highs as supplies tightened and buyers moved to keep quantities in processing pipelines.

AWEX senior market analyst Lionel Plunkett said the AWEX-EMI rose 70 cents to 1312 cents this week.

This came as the Australian dollar dropped US2.04 to US76.97 cents, while the EMI in US terms climbed 29 cents to 1010 cents clean. Brokers only passed in one percent of the 37,719 bales (5441 fewer than last week) offered.

Mr Plunkett said the market showed a similar trend for each day, with prices opening on a strong footing before accelerating higher during the course of selling.

“A price differential of 30 cents between many of the opening and closing quotations was testament to the strong buying pressure that unfolded during the sale.

“There were reasonably similar instalments over both days measuring in the 30 to 60 cent range, though Fremantle recorded smaller rises due to their Wednesday-only auction,” he said.

“The broader microns logged the best results, especially in Melbourne where a better selection pushed 23-microns to its largest weekly jump in thirteen years.”

Market squeezed for supplies with ongoing demand

Elders National Wool Selling Centre manager Simon Hogan said obviously the market is squeezed for supplies and there is continuing demand there.

“There is probably more genuine demand than most of us thought was around, plus probably a bit less wool in the pipeline than we thought.”

Mr Hogan said Chinatex was leading the charge in the purchase of Merino wool (16.9 percent of the offering) and crossbreds (21.5pc), followed by other major buyers Techwool Trading, Fox and Lillie, Lempriere Australia, Tianyu, Kathaytex and Australian Merino Exports.

“So it is China-driven.

“There would be a little bit of European business, but in this market the huge rally has been driven by China.”

Mr Hogan said feedback from the IWTO Conference in China last week after successive falls in the A-US dollar exchange rate indicated that the Chinese were “reasonably comfortable” with recent price levels.

“I think that with the currency coming back in US terms they weren’t complaining that wool was too dear, so hence it has jumped it up almost a dollar this week – they might be (complaining) now.”

Mr Hogan said the flow of stored wool onto the market that started six weeks ago had slowed up, with a normal flow of wool onto auction floors in recent weeks.

“We’re getting to that quieter time in receivals when the focus of a lot of farmers is getting the crop in and traditionally late May-June there are not a lot of sheep shorn.

“Nationally we are heading into that quiet time for receivals.”

Mr Hogan said not all stored wool has been clear, with most of the remaining quantities possibly fine and superfine wool. More stored wool could be sold in the new financial year.

“No grower should be holding crossbreds and carding wools, now medium and stronger wool.”

23 micron wool prices at record level

Mr Plunkett said at 1364 cents the 23-Micron Price Guide (MPG) is now at a record level, eclipsing not only the AWEX series which commenced in 1995, but also the Australian Wool Corporation series which commenced in 1979.

“The 23 MPG now joins the 28, 30, 32, and MC indicators which are all at record highs in AUD terms.

“However, there is still some distance to bridge before they are at record levels in USD terms.”

Mr Plunkett said Merino skirtings also found good support, but the rises were generally only half the amount made in the fleece sector.

“Crossbreds continued to march higher on the back of diminishing volumes — 25/26/27 microns jumped 80 cents.

“Merino cardings capped off a successful week, rising 20 to 30 cents.”

Mr Plunkett said the recent higher prices appear to have had an impact on auction volumes which have surged by 22pc over the past four weeks when compared to the same period last season.

“With Fremantle moving into a fortnightly selling pattern the remaining four weeks of the season are expected to be more in line with previous years,” he said.

Sources: AWEX, Elders.

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