Month: September 2019

Weekly Wool Forwards for week ending 27th September 2019

Forwards has almost, but not quite seen exclusivity toward 19 Micron wool this week.

We saw one trade for 21 Micron wool, agreeing at 1,750¢ for October.

For 19 Micron wool, a mighty ten trades dealt, the lions share of these this year.  Four trades were agreed for October between 1,790¢ and 1,830¢. Another four trades were agreed for November, agreeing between 1,800¢ and 1,850¢. One trade was dealt with each for February and April 2020 and agreed at 1,800¢.

For 19 Micron at least, the trades this week do point toward stabilizing price for the time being, as the recent steadying of confidence continues. We’ll have to wait for more data to see if this trend flows through to the other MPGs and it’s anyone’s guess how long it will last.

Another gloomy forecast isn’t going to help

Recent cattle market trends continued this week.  Young and store cattle remained on the slide, while support for finished cattle remains.   The latest BOM three month outlook doesn’t offer a lot of hope for rising prices for the rest of the year.

There was a bit of rain around this week, but most of it remained close to the coast.  As such the rain isn’t going to do much to markets, with little impact on total feed supplies.

There was further rain in Victoria and South East SA, which have been the only area where feed growth has been outstripping livestock demand.  The problem is that the grass will only be growing for another month or two, and then supply will lift from the south.  By this stage markets will well and truly be looking for the northern summer rains.

The Eastern Young Cattle Indicator (EYCI) actually didn’t perform too badly this week.  The EYCI lost 5¢ to hit 473¢/kg cwt, a four month low.  It’s interesting to see cow prices (figure 1) maintaining what are relatively strong levels, despite the dry.  No doubt close record beef export prices are driving competition for what cows are still surplus to requirements.

Figure 1 also shows the east coast heavy steers maintaining their strong levels.  It’s remarkable to see heavy steers not far from record levels, while young cattle are sliding lower.

In the west cattle prices are still showing a premium to the east, at least for young cattle.  The WYCI sits at 520¢/kg cwt, but it is behind finished cattle prices, with finished yearlings making 560¢ over the hooks.

What does it mean/next week?:

Figure 2 shows a rather depressing forecast.  It should be remembered that it is suggesting there is a less than 35% chance of receiving above median rainfall.  For the risk taker a 35% chance of 40% profit might be attractive.  The downside risk grows smaller every week we see prices fall.

We don’t expect to much to change in market trends until there is some sort of widespread precipitation.

Calm after the storm

Last Thursday while Melbourne & Fremantle continued to lift, Sydney didn’t sell, so this week the market between centres firstly had to realign. This saw Melbourne down and Sydney up on Wednesday, however when the dust had settled at the close of the week there was a feeling of relief that the market overall was positive following a couple of tumultuous weeks.

Despite much speculation before the market opened that this week would see much of last weeks gains returned, the result was strong with a steady demand from buyers at the current market levels.

The Eastern Market Indicator (EMI) lifted 7 cents or 12% for the week, to finish at 1,542 cents. The Aus$ fell slightly to US $0.679. This saw the EMI in US$ fall by 9 cents to end the week at 1,047 cents.

Western Australia again had a positive result. The Western Market Indicator rose by 18 cents to close at 1,643 cents .

Again, it was the finer types that performed strongest, reflected across the three selling centres. Crossbreds were generally unchanged, however the Merino Cardings Indicators in Sydney and Fremantle lifted, with the 1,000-cent mark again in sight.

30,135 bales were offered to sale with 10.4% passed in. This saw 27,007 bales cleared to the trade (Figure 2). There have been 102,227 fewer bales sold this season compared to the same period last year. This is an average weekly gap of 11,359 bales.

The dollar value for the week was $47.09 million, for a combined value so far this season of $377.78 million.

The week ahead

Next week just under 30,000 bales are rostered, with the roster only increasing marginally in subsequent weeks.

Although the volatile market is still playing on all participants minds, there is somewhat a feeling of restored confidence. With the much reduced supply compared to previous years, the market should at least hold these levels, although the recent big swings will no doubt cause the market to remain on edge.

China increasing share of New Zealand’s lamb

Earlier in the week we took a look at beef export flows out of New Zealand, and the impact increased Chinese demand was having on markets.  Chinese demand for lamb and mutton has also been on the rise, and it’s an opportune time to look at how New Zealand is faring on this front.

New Zealand is Australia’s only real competitor in lamb export markets, and as such it’s worth checking in on how their exports are tracking.

China has traditionally been a large market for New Zealand.  For the year to date New Zealand has exported more than twice the amount of lamb to China than Australia has.  Over the last five years New Zealand has exported 64% more lamb to China than Australia.  Needless to say China is a major market for New Zealand.

Despite being historically strong, New Zealand’s exports to China have been even stronger this year.  Figure 1 shows that every month except May have seen larger NZ lamb exports to China, and this has seen the year to July exports up 19% on last year, and 37.5% on the five year average.


The increases in exports to China have not been due to stronger production.  Figure 2 shows China’s share of New Zealand’s beef exports has grown this year.  For the year to date 45% of New Zealand’s lamb exports have gone to China.  China’s share was well up on 37% in 2018 and 32% average over five years.

Figure 1 shows there is plenty of seasonality in New Zealand’s exports to China, and while this is a function of production seasonality, China’s share of exports does decline in winter.  A smaller share for China when production dips is likely due to European markets having more money.

China’s increased volume and share or New Zealand’s lamb exports has come largely at the expense of the United Kingdom.  The UK is New Zealand’s second largest export market, yet its share lamb exports has fallen from 16% in the year to July 2018 to 12% in 2019.  The US is the third largest market to NZ lamb, and managed to maintain its share at 7%.

What does it mean/next week?:

Increasing demand for lamb from China has been impacting our friends over the ditch as well.  We can see declining production and exports from New Zealand in June and July obviously helped push our prices higher.

Moving forward China will start getting more lamb out of New Zealand in November and December, and this will help keep a lid on price rises here.  However, the increasing share of lamb going to China means other markets might have to come to Australia to find their fill.

Lamb up mutton down

The lamb market seems to have found a level it like, but mutton continued to slide this week.  It doesn’t seem price moves were in response to supply, with demand shifts driving markets early in the spring.

The data is a week old, but east coast lamb slaughter to the end of last week saw the rise in lamb slaughter slow.  Figure 1 shows lamb slaughter still running ahead of last year, but at similar level to 2016.  Back in 2016 the Eastern States Trade Lamb Indicator (ESTLI) sat at 621¢ in mid-September.  It was a great price for the time, but now the market is 190¢ stronger.

Figure 2 shows the ESTLI has now been steady for a month despite rising slaughter levels.  This gives an indication that processors might be able to move lamb at around 800¢, and are happy to increase slaughter levels at this price.  There is a way to go in rising supply before chains are full and prices come under significant pressure.

Rising lamb supplies are putting pressure on mutton values.  The National Mutton Indicator (NMI) fell another 35¢ this week to hit a six month low.  Mutton does remain 33¢ above the levels of this time last year, but that was under very strong supply.

Prices in the west have also found a base, but at a lower level.  The WATLI gained 13¢ this week to move back to 646¢/kg cwt and not far off over the hooks quotes.  WA Mutton was also up, at 451¢ now at a much smaller discount to the east coast.


What does it mean/next week?:

Unless you are on the North West coast of the country the latest Bureau of Meteorology (BOM) three month outlook, released yesterday, was not very promising.  There is a less than 35% chance of anywhere on the east coast getting median rainfall from October to December.

Normally this would mean increased supply and lower prices, but the dwindling flock will mean it can’t be as strong as last year.

Grain prices on a record push?

The grain market in Australia has been on a rollercoaster since last year. The excitement has continued, and we see local markets continuing to rise. In this update we take a look the woes in Western Australia and look at whether we will hit last years pricing environment.

Australian grain markets continue to be focused on local conditions, with little influence from overseas. This is due to the continuing poor conditions within Australia. During last week the ASX contract had lost steam after a sharp rally and had fallen to A$355. This week, the Jan 2020 has slowly crawled back to A$367. The market has however had slim volume (figure 1), with only 421 contracts trading. This equates to 8420mt traded, which is a reduction on the previous weeks 52320mt.

In recent weeks one of the banks were quoted as saying that prices could rise above last years levels. I thought it would be of interest to see how the market is tracking compared to last year. In figure 2, the average price for each of the weeks running up to last years and this year’s contract expiry. As we can see the contract has increased in recent weeks, but not to the same levels.

This time last year the Jan 2019 ASX contract was trading at A$442 whereas the Jan 2020 contract this week is trading A$78 lower. It is not impossible that the price will rise above last year, but we will have to see a very strong rise to exceed the same levels. At this point of the year the price rise is unlikely to come from overseas moves, so will require a further strong reduction in domestic production.

In 2018 the west coast won both the grand final and prize of a large crop. In the past fortnight both have been blown out of contention. The dry weather and frost damage has reduced the potential of the crop, with GIWA showing the following amendments:

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What does it mean/next week?:

There have been concerns about frosts in Victoria and South Australia. In the next week the market will get a handle on any losses.

The black sea region is in the process of starting to plant the winter crop. Recently these areas have experienced dry conditions. It will be interesting to see whether there will be a reduction in planting.

Weekly Wool Forwards for week ending 20th September 2019

Futures contracts have been chugging along with eleven trades this week.

We saw one trade for 18 Micron wool, agreeing at 1,800¢ for March 2020.

For 19 Micron wool, five trades dealt. One trade was agreed at 1,755¢ for October and for November, one trade agreed at 1,720¢. Two trades were dealt for December, agreeing between 1,710¢ and 1,720¢.

For 21 Micron wool, four trades dealt, one for October at 1,620¢. One trade was dealt for January, May and June 2020 and these agreed at 1,630¢, 1,580¢ and 1,600¢ respectively.

One trade was dealt on 28 micron wool, agreeing at 900¢ for October.

Confidence continues to be evident in the forward market, even while the auction market volatility is still on the mind. Prices and interest could change in a heartbeat as the future really is uncertain.

Wool market rises from the ashes

It’s been a week of major come backs. While the wool market lift might not be the most celebrated national victory of the week, records were hit for six to make a spectacular recovery.

Goodwill discussions between China and the US on trade appear to have significantly boosted buyer confidence and resurged competition.

The Eastern Market Indicator (EMI) lifted 170 cents or 12% on the week, to finish at 1,535 cents. This correction was an all time record for the highest weekly increase of the EMI and has pushed the EMI back where it was a month ago. The Aus$ also lifted to US $0.687. This saw the EMI in US$ increase 125 cents to end the week at 1,056 cents.

Western Australia made the most staggering recovery. The Western Market Indicator rose by 242 cents to close at 1,625 cents (Figure 1). The daily gain of 198 cents was the largest increase in a day since records began according to AWEX.

All microns and types saw strong price rises but broader Merinos were most keenly saught after. 19.5 to 21 MPGS rose 175 to 305 cents across the three selling centres. Crossbreds saw further gains on last week in the order of 65 to 115 cents. The Merino Cardings Indicators also took a slice of the action, rising 90 to 185 cents on the week.

21,839 bales were offered to sale and just 6.2% passed in. This saw 20,488 bales cleared to the trade (Figure 2). There has been 94,403 fewer bales sold this season compared to the same period last year. This is a average weekly gap of 11,800 bales.

The dollar value for the week was $34.2 million, for a combined value so far this season of $330.69 million.

The week ahead

With China waiving some tariffs on US goods and the US postponing implementation of their tariff increase, both nations appear to be testing the waters ahead of face to face negotiations in October. These are positive signs for all in the wool supply chain.

This week has restored some confidence in sellers and as a result next weeks roster has increased to 31,107 bales. All three selling centres have sales on Wednesday and Thursday. The following weeks have also seen an increase in rostered offerings of 28,510 and 33,980.

Support for young cattle drying up

The young cattle price slide continued this week as the lack of rain saw price support dry up further. There were no falls for finished cattle however, as demand continues to respond to rising export cattle prices.

The cattle prices, as represented by the Eastern Young Cattle Indicator (EYCI), spent their fifth week on the slide and hit a new thirteen week low. The EYCI finished Thursday at 477.25¢/kg cwt, having lost 22¢ for the week. Another stat, shown in figure 1, has the EYCI lower than last year’s level for the first time in seven weeks.

Finished cattle prices have maintained their strength. Heavy steers on the east coast are above 540¢ in all states and averaged 573¢, thanks largely to prices being over 600¢ in Victoria.

The east coast trade steer indicator averaged 570¢, while feeders are also strong, at 280¢/kg lwt.  Even on the young cattle front, it is only restocker types which are suffering the discount.

Export beef prices continued to creep higher. This week it was thanks to rising values in the US, which hit 223.5US¢/kg swt. It’s not quite a new high, but it has only been half a cent stronger back in April, over the past two years.

Steiner’s weekly report on the North American imported beef market was blaming weaker beef imports from New Zealand for strong 90CL values in the US. Guess where NZ’s beef is going?  If you guessed China, you would be right.

Next week?:

Demand for export beef has the 90CL in our terms just 18¢ off an all-time high. It’s little wonder processors are maintaining prices to attract cattle. Cattle markets are now very much a tale of store versus finished. A failing spring is likely to see this continue, as we now look for northern summer rain to kick start the store market again.

Weekly Wool Forwards for week ending 13th Sept 2019

Interest in futures seems to be bouncing back, with 21 trades last week and 15 this week. Crossbreds have garnered some of that attention this week.

For 19 Micron wool, five trades dealt. One trade was agreed at 1,650¢ for November. Four trades were dealt for April 2020 and agreed between 1,600¢ to 1,670¢.

For 21 Micron wool, six trades dealt, one for September at 1,650¢ and three for November with agreements between 1,520¢ and 1,535¢. One trade was dealt for both January and April 2020 at 1,600¢ and 1,630¢ respectively.

Four trades dealt on 28 micron wool, two for both November and December agreeing between 835¢ and 850¢.

It’s good to see confidence returning in the forward market. That this has come when the auction market seems to have hit its base and indeed is bouncing back seems of little coincidence.