Month: February 2019

Minor movements for wool.

Posted on by Caitlin Dearden

The general overview of this week’s wool market was that sellers saw minimal movements. In fact, if markets were stronger on day one they gave the gains back the next day, and vice versa if markets started softer.

Buyers began keenly but again there is evidence of wariness at these price levels, while wool growers are happy to continue to sell with a modest pass-in rate this week.

The Eastern Market Indicator (EMI) increased 7 cents on the week, ending at 1,934 cents. The Au$ compared to the last week was stronger at 0.712 US cents. That lifted the EMI in US$ terms to 1,405 cents, a strong rise of 32 cents (Table 1).

Fremantle had a smooth week of sales, with some small gains in finer MPG’s. The Western Market Indicator (WMI) rose 2 cents on the week to finish at 2,094 cents.

This week saw a supply drop on levels from the last few sales, with just 38,830 bales on offer. Growers passed in 7.2% of bales offered, resulting in a clearance to the trade of 36,027 bales. The season to date has seen 952,848 bales offered which is down 15.7% bales few than the same period in the 17/18 season.

The dollar value for the week was $73.63 million, for a combined value of $1.9 billion so far this season.

The total wool offering over all micron ranges is showing a mixed bag. Any MPG categories broader than 18.5 have presented lower volumes season on season, with the 21 MPG as an example 44% down on last year. On the other hand, finer than 18.5 MPG volume is up all the way to the superfine types. 18 MPG is up by 17% while the 15 MPG is 13.5% on a season to date comparison.

Crossbreds, while limited in offering, were keenly sought this week; it was a strong performance with the 28MPG gaining circa 90 cents in both Sydney & Melbourne. The cardings indicator fell again in all centres with reports of 20 to 25 cent falls in the East, while the West was largely unchanged.

The week ahead

Next week the offering isn’t set to reach too far from this week’s level, with 40,426 bales rostered across the three selling centres. Sydney will be holding it’s designated Superfine Sale.

Looking further ahead, a big drop is on the roster. Week 33 of the selling season is currently set for just 30,981 bales, with 30,000 to follow.

Wherefore art thou heavy lamb?

Posted on by Caitlin Dearden

In the Friday sheep market comment we noted the lack of Heavy Lamb across NSW sale yards since the start of the season. This analysis piece looks at the other two key mainland states across the East coast to see if the pattern of Heavy Lamb throughput is being replicated.

Recap on the Friday Sheep market comment here.

Heavy Lamb yarding levels in NSW have averaged 25,750 head per week since the start of the season. Compared to this time last year NSW Heavy Lamb yarding was averaging over 42,000 head, so we are running nearly 40% below the 2018 pattern. Measuring the volumes across the last five seasons shows that Heavy Lamb throughput in NSW for the same time frame is around 33,600 head, which puts the current sale yard volumes 24% under the long-term seasonal average – Figure 1.

Victorian sale yards have been displaying a similar pattern with the current year’s volume averaging 14,226 head per week compared to nearly 21,000 head in 2018. Although not as severe a difference than in NSW it still represents a drop of 32%. A comparison to the longer-term average over the same period shows Victorian Heavy Lamb yarding levels averaging over 16,600 head per week putting the 2019 pattern nearly 15% below the five-year average – Figure 2.

The story is the same for South Australian throughput levels too, and despite the absolute yarding figures in South Australia being lower than Victoria and NSW, the magnitude of the decline in yarding volumes are like what is being experienced in NSW.

In South Australia Heavy Lamb numbers at the sale yard averaged 2,760 head per week compared to just over 4,800 head in 2018, a drop of 43%. The 2019 pattern for the five-year seasonal trend is also below average running 37% under – Figure 3.

What does it mean/next week?

Given the tough trading conditions last season and the move to flock liquidation due to the dry spell its unsurprising to see the lack of Heavy Lamb in these states. It’s likely to see Heavy Lamb prices remain well supported while the supply remains soft.

Furthermore, it won’t take much to see a kick on in lamb prices should we start to see a more favourable turn around in weather conditions as we head toward the Autumn.

Key points:

  • Victorian and South Australian sale yard throughput levels for Heavy Lamb are mirroring the reduced supply being experienced by NSW.
  • Victorian Heavy Lamb numbers are running 15% below the five-year seasonal average.
  • South Australian Heavy Lamb numbers are more pronounced, trending 37% under the five-year seasonal average.

Weekly Wool Forwards for week ending 01 February 2019

Posted on by Caitlin Dearden

This week has seen a lot more action in the market across both fine and coarse fibers. We saw confidence in coarse wool prices decline slightly this week, after an interesting increase after the Christmas break. The rise in the Aussie dollar didn’t seem to dampen the forward market.

In the 19 micron category, six trades were dealt. Three trades were made for April, two were for 2230¢/kg and one was the first minimum price contract we’ve seen for many months.  The May trade hit at the same price, while the October and November trades were agreed at 2140¢/kg and 2128¢/kg respectively.

In the 21 micron category, five trades were dealt. Most of these were for April and May, the agreed price ranging from 2060¢/kg to 2190¢/kg. The odd one out was for October and agreed at 2060¢/kg.

In the 28 micron category, three trades were dealt, two for May for 960¢/kg and one for June for 970¢/kg.

Over the last two weeks we saw coarse wool bids close to auction levels, but this trend seems to be declining, as bids were below auction rates by more expected margins.

We saw an upswing in the Aussie dollar of nearly 1.5¢, which would usually mean less activity from overseas buyers. It didn’t appear to hold back forwards sales this week, hinting that either further upward movement or supply is a concern.

It’s so hot that the trees are whistling for the dogs

Posted on by Caitlin Dearden

The markets have been quite quiet in recent days. In this weeks comment we are looking overseas at bearish wheat planting numbers, and the impact of heat on electricity demand.

In lieu of data from the USDA, private forecasts become more important. Farm Futures in the US have conducted a survey of producers in order to gain an insight into planting expectations. It is anticipated that corn will rise by 1.3% year on year. There will however be major downward revisions to tariff impacted soybeans and sorghum with a substantial 5.5% and 12.1% reduction.

Wheat continues to lose popularity in the US, with planting levels for all wheat (spring, winter & durum) are at 46.6 million acres. This is the second lowest level in the past century (figure 1), the lowest being two years ago in 2017. Although technology has meant that yields are drastically improved from the past, this does place the US in a poor position if the weather turns poor in the growing season.

Yesterday South Australia sweltered through record temperatures, and Victoria is going to be hit with hot temperatures (and some strong winds in places). As temperatures increase demand (figure 2) on power infrastructure increases due to the number of people (myself included) sitting in air-conditioned rooms.

The weather is also starting to impact heavily upon the sorghum crop. The beneficial rainfall in December in NNSW and QLD has been followed up with dry weather, which has diminished the potential of the summer sorghum crop.

It’s important to be aware of the risk of heat stress in these hot days, so ensure that you remain fully hydrated – and slip, slap, slop.

What does it mean/next week?:

The reduction in acreage in the US starts to point toward a market balancing further and further towards a bullish sentiment. It will only take a production issue in North America or the black sea region to see a strong upward movement.

Sellers happy but buyers wary

Posted on by Caitlin Dearden

On the surface, the wool market appears to be meandering along at a comfortable level, especially if you’re the seller. Buyers, on the other hand, are acting with caution in accepting orders for future delivery.

Another large clearance relative to the last 8 months was evident, with prices pretty much unchanged. However, looking ahead, the consensus is that the challenge of supply falling below normal expectation into the winter is rapidly approaching.

The Eastern Market Indicator (EMI) increased 4 cents on the week, ending at 1,927 cents. The Au$ compared to the last week was slightly weaker at 0.712 US cents. That put the EMI in US$ terms at 1,373 cents, a small drop of just 3 cents (Table 1).

The market in the West wasn’t able to sustain its level, that’s despite nearly 1,000 bales fewer hitting the market compared to last week. The Western Market Indicator (WMI) fell over the week to end at 2,092 cents, down 13 cents on last weeks close and all MPG’s lower.

Supply was down on previous sales, with 41,757 bales on offer. Growers passed in 9.6% of bales offered, resulting in a clearance to the trade of 37,749 bales. The season to date has seen 908,332 bales offered which is 177,718 bales few than the same period in the 17/18 season.

The dollar value for the week was $78.1 million, for a combined value of $1.82 billion so far this season.

We continue to see a divergence of demand for good quality wool with good measurements, compared to wool that has poorer measurements, generally as a result of the drought. Wool that was presented with low staple strength and high mid breaks again struggled to find buyer support this week. On the other hand, wool exhibiting high quality, high staple strength and low mid breaks were keenly sought.

Crossbreds gave up some the gains that were recognised over the last couple of weeks. 26MPG wool was the most affected, losing 35 to 40 cents while demand for 30-32 MPG saw increases. The cardings indicator fell 15 to 45 cents across eastern and western markets.

The week ahead

Next week the offering is due to be lower again, with 40,629 bales rostered across the three selling centres. The trend is set to continue for week 32 with 37,575 bales rostered, and 38,242 the following week.