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Wool prices surge again to give growers their best prices in decades

by Terry Sim, 18 May 2018

Elders’ Andrew Williamson, left, with Loddon Vale grower Greg Bear. Photo – Elders.

AUSTRALIA’S wool price benchmark exceeded the 1900-cent mark for the first time this week to reach 1943 cents a kg clean as demand for medium Merino wools surged, giving some growers their best wool prices in decades.

The AWEX Eastern Market Indicator is now only 57 cents shy of the 2000 cents mark, after lifting 52 cents this week; however, some resistance has been noted to 21 micron price levels in US dollars.

Brokers passed in just 2.3 percent of the 36,398 bales offered, 1444 fewer than last week, and 31,996 bales are currently rostered for next week’s auctions.

AWEX senior market analyst Lionel Plunkett said the EMI has now risen 167 cents over the previous five sales.

“Also, worth noting, the market movement was not heavily influenced by currency fluctuation, when viewed in $US terms the EMI rose by 49 cents (to US1462c/kg), only 3 cents difference from the $A basis.”

Mr Plunkett said due to seasonal conditions, a large percentage of the auction offering this week was again made up of lesser style, lower yielding wool.

“Despite the overall quality of the wool on offer, buyer demand continued to be intense, pushing prices steeply upward for the second consecutive week.

“All types and descriptions generally sold at levels 50 to 90 cents above those achieved at the previous sale, with wools 20 micron and coarser enjoying the largest gains.”

Mr Plunkett said the individual Micron Price Guides (MPG) for 18-22 microns in all three centres are also sitting at all-time highs.

“The skirting market tracked a similar path to the fleece, prices generally rose by 40 to 80 cents.

“The finer crossbreds also recorded gains, pushing the MPG for 26 and 28 microns to new highs.”

Mr Plunkett said crossbreds coarser than 30 micron were irregular.

“A limited supply of oddments has again come under intense buyer scrutiny, resulting in prices generally rising by 20 to 40 cents.

“This was reflected in the three Merino Carding Indicators (MC) rising by an average of 22 cents.”

Post-auction business to signal market direction

Fox & Lillie Rural brokerage manager Eamon Timms said business conducted this afternoon would give an indication as to whether the EMI would reach the 2000 cents mark next week.

“If the buyers are keen on a Friday after the market has gone up then often that is a really indicator that the market is going to be solid to maybe dearer (the next week).”

He said sometimes the Chinese buyers wait until Monday or Tuesday to call exporters and traders to book wool, but enquiry Friday afternoon is usually a signal for a bullish market next week. Mr Timms put the strong market down to good demand and a lack of supply, with all types lifting.

“I was expecting the market to be dearer, but the scale of the rise was more than anticipated.”

Best prices ever for Victorian wool grower

Loddon Vale wool growers Greg and Jo Bear, and Graeme and Rosina Bear, received their best-ever wool prices this week, when their 150-bale April shorn clip sold through Elders in Melbourne.

Greg Bear said the clip averaged about $2630 per bale, when previously $1800 a bale was a good price. A main line of 18.5 micron ewe weaner wool yielding 71pc made to 1634c/kg greasy and giving an average cut per head of $85-$90. The Bear family’s Tamaleuca blood flock clip generally averages 20.5 micron with a yield of 73pc and is classed by Andrea Froom was Bunnaloo.

“That’s certainly the highest price that we’ve received in my time in just over 30 years.”

The Bears also sold Poll Dorset cross lambs to Woolworths for $164 this week.

Despite the Bear’s pastures only receiving 20mm of rain this year, Elders wool manager at Swan Hill Andrew Williamson said they achieved the highest bale average of any clip he had handled. The clip was a credit to the family and the classer, and was all appraised as MF4 type with tensile strength measurements in the mid-30s.

Shortage of medium Merino fleece wools

Elders southern zone wool manager Lachie Brown said there is a shortage of wool supply, particularly for medium Merino wool at the moment.

“The Chinese types 19-23 microns are really driving this market; the lack of those types available at this stage.”

He said some business had been done after the recent International Wool Testing Organisation Conference in Hong Kong.

“Certainly top makers need to keep the machinery turning over and there is some good signs starting to come out of India; they are becoming more accepting of the higher price levels.

“Looking at some of the end products; fake fur and some of these newer products are starting to pick up in terms of retail demand.”

Mr Brown attributed the recent prices rises to the positive demand and the Australian clip being in its lowest seasonal supply period, particularly for the medium Merino wools.

He said the discounts for high vegetable matter content and low staple strength wools have reduced considerably in the past four weeks. A 21 micron fleece wool with 3-4pc vm content is currently discounted by 60-80 cents compared to a similar diameter line with 1pc vm or less, whereas the price difference 4-5 weeks ago was 100-140 cents.

“A lot of the exporters and processers have had to widen their tolerances to get the required quantities and that’s what we are seeing at the moment.

“The whole market has shifted higher, but the lesser spec types have increased by a greater degree.”

Some resistance to higher prices appearing

Mr Brown said there has been resistance to 21 micron fleece prices in US dollars — US1600-1650 cents — which are on a par with 2011 levels, but he expected supplies of this wool to continue to decline due to seasonal conditions in pastoral areas.

“If we can break through that then there is significantly more upside there.

“But in the next 4-6 weeks supply is going to continue to decrease and as long as the orders keep flowing through and even if there is less of them or demand backs off a touch, the market should be able to hold,” he said.

“The real test will come in July depending on how much wool has been held back for the next financial year as well and the size of those offerings.

“If we get a large offering or two it will place pressure on prices, and if we get through that then the next step is into late August-September when we start to see the new season wool come to market.”

Endeavour Wool Exports director Josh Lamb said from China today there will be some resistance when a wool market moves as quickly as Australia’s has. But he said stocks are low in China and the small auction offerings in Australia meant the market should be ‘ok’. Currency would play a role in whether the AWEX EMI tipped 2000 cents, he said.

“Most wool processors around the world are very positive about the coming few years.”

Click here for the latest AWEX Micron Price Guides.

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