News

A tentatively positive start to the week at Wednesday’s auctions, but the small gains made were given back plus a bit extra on Thursday. The EMI closing the week at 1534¢, a fall of 10¢, and the WMI slightly heavier falling by 33¢ to close at 1527¢.

The market opened to solid demand on Wednesday but nervousness crept in on Thursday to see the market in general close below last week’s levels. Eastern prices 5-35¢ softer while the West saw a bit more of a slide, with 15-70¢ falls registered. A reduced offering of bales for sale, just over 38,000 bales came forward this week, however weaker demand saw the pass in rate jump this week to 16.1% with 31,915 bales sold.

With the market entering the winter trading period we thought we would take a retrospective look at the wool market. Figures 2 to 4 show the market movements compared to May 2016 (last year) and also to May 2012 (5 years ago).

Firstly currency; while it has hardly moved over the past 12 months, it is 27 cents or 36% lower than five years ago. This is reflected in the EMI levels; in A$ terms the market is higher compared to both periods, while in US$ terms it is still yet to reach the 2012 level while sitting 21% above last years US$EMI.

Taking a look at the MPG’s, Merino wool reflected in the 21 MPG & finer types is stronger either comparing to 2016 or 2012. Cardings are 10% higher than last year, but a massive 70% above 2012 reflecting the increased demand for double sided fabric.

Compared to last year, in US$ terms (Fig 4) all bar crossbred types are stronger, particularly the finer types with 17 MPG up 50% year on year. The story is a little more mixed when we compare against 2012 prices in US$’s, and while 19 MPG & finer as well as Cardings are now above 2012 levels, 20 & 21 MPG were higher back then. The A$ in 2012 was trading US$1.01 cents and clearly impacting on the buyers.

The good news from this is that while wool grower returns are very good, wool to our customers is not expensive compared to recent history; this is a good thing. In fact, the recent high for 19 MPG in US$ terms was June 2011; the Southern 19 MPG was quoted around 1750, but at that time the A$ was strong at US$1.05 resulting in a US$ 19 MPG price of 1820 – compared to the current US$ price of 1460 which converts to A$19.77 in the market when the current A$ level is applied.

The week ahead

Looking ahead we have three successive weeks of sales with bales on offer below 38,000. Next week 36,343 bales are scheduled and all three centres are in operation on Wednesday and Thursday. Subsequent weeks see 37,680 bales rostered on week 47, dropping to just over 34,000 for week 48.