Category: Wool

Seven weeks of sequential losses in the wool market have finally turned around. With the market being on recess for the next week due to the Easter break, buyers were aggressive in their attempt to secure quantity. The egg hunt hasn’t begun, but the hunt for higher yielding wools continued and these styles generally achieved larger premiums over previous weeks.

The Eastern Market Indicator (EMI) gained 7 cents on the week to close at 1,943 cents. The Au$ was stronger again this week, lifting 0.03 to finish at US $0.719. This was enough to put the EMI in US$ terms up 11 cents to end the week at 1,398 US cents (Table 1).

The Western Market Indicator (WMI) rose by just 1 cent to 2,065 cents.

There was an increased offering this week, 40,774 bales were offered for sale. AWEX reported that with the upcoming break, many sellers were keen to offload their wool. Fairly unchanged on last week, 10.3% of the offering was passed in which meant 36,574 bales were cleared to the trade. In the auction weeks since the winter recess, 1,195,101 bales have been cleared to the trade, 226,978 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,675 bales per week fewer.

The dollar value for the week was $75.2 million for a combined value of $2.765 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,056 per bale across all types for the week.

Crossbreds have continued the running streak, gaining another 40 cents for 26 and 28 micron, while 30 MPG fell 20 cents this week. The cardings indicator declined in all selling centres by 5 to 30 cents.

The week ahead

Next week there won’t be any sales due to the Easter recess. Sales resume on the week of the 29^th of April where 42,065 bales are rostered for sale. The following week 26,731 bales are currently expected to come to market.

Higher than average interest in crossbreds continued this week, a reflection of the historically good prices they are experiencing. The Aussie dollar rose on average this week and apart from the crossbreds, the forward market was quiet again.

In the medium wool category, two trades were agreed for 21 Micron wool; one for June at 2250¢, the same price for June as both trades in this category last week; and one for May, again at 2250¢.

In the coarse wool category, four trades were dealt for 28 Micron, one for November at 1,050¢ and three for April next year at 995¢.

The Australian dollar climbed to a short peak of over 72¢ this week, but has softened slightly today.

The Easter recess for the Auction market will likely mean we won’t see trades next week unless the Aussie Dollar performs backflips. The bunny trail for the forward curve is still pretty flat, so we expect egg collectors (purchasers) will continue to be happy with prices for some time.

The wool market has progressed through another week sitting firm. The Merino market saw slight declines in the east and west but it’s the Crossbred market that’s attracting all the attention. 

For the fourth consecutive week, crossbred prices have risen which is a direct contrast to the seven consecutive weeks of declines in the Eastern Market Indicator.

The increasing selection of low yielding wool was still a prominent feature of this week’s market. Despite the offering in Sydney being the smallest since AWEX records began (1995), the limited supply wasn’t enough to counteract the discounts on poor quality wool.

The Eastern Market Indicator (EMI) eased by 7 cents to settle at 1,936 cents. The Au$ was slightly stronger at US $0.716. This was enough to put the EMI in US$ terms up 4 cents finish the week at 1,387 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) declined by 31 cents to finish at 2,064 cents. AWEX made note that the Western Indicator does not include crossbred types which explains why the losses in the West have been more substantial than in the East, they aren’t being supported by strong crossbred values.

37,527 bales were offered for sale this week. 10% of the offering was passed in which meant 33,793 bales were cleared to the trade. In the auction weeks since the winter recess, 1,158,527 bales have been cleared to the trade, 222,475 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,741 bales per week fewer.

The dollar value for the week was $69.54 million for a combined value of $2.690 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,058 per bale across all types for the week.

Crossbreds gained another 20 to 30 cents this week, and the 28 micron even hit a new record in the South, closing at 1,263 cents clean on Thursday. This weeks analysis article looked into the strength in crossbred prices compared to the broader Merino market so for a more detailed analysis read the article Here. The cardings indicator declined by 5 to 15 cents on the east coast, and gained 5 cents in the west.

The week ahead

Week 42 of the season is the last week before the Easter recess. 42,487 bales are rostered across the three centres, with sales just on Tuesday and Wednesday.

Last week, only two wool trades were agreed, and the relative quiet continued this week.  Only four trades were dealt, with two of these being for crossbred fibres. Interest in crossbreds is higher than average, and that’s likely to be because of the good historic prices they are experiencing.

In the medium wool category, two trades were agreed for 21 Micron wool, both for June at 2250¢.

In the coarse wool category, two trades were dealt for 28 Micron, both for September at 1100¢.

It does feel that the forwards market has been quiet. The Australian dollar was slightly stronger this week compared to last week and has been trending slightly higher over the last month, which might give us some clues.

The forward curve can indicate future behaviour. Because we’ve seen prices on the auction market falling, the forwards market curve has gone relatively flat, which leads us to believe we might be seeing a base and it indicates that buyers are fairly comfortable at these levels. It’s hard to know for how long, with many factors influencing auction prices, but the wool market has been historically stable and it’s hard to see that it’ll change overnight.

The wool market seems to be sitting in a comfortable space right now, and despite the drought influence on quality there are minimal price movements week on week.

There is a negative impact on the market from the continued supply of low yielding wool coming to the market continues, however the current value of the offering is no doubt being well received by wool producers.

Again, AWEX report that the there is insufficient supply of better style high yielding wool to satisfy buyer demand, these types are keenly sought by exporters trying to satisfy demand. They also note that while the market has had a 6-week negative run, it has only retraced 4.5%.

The Eastern Market Indicator (EMI) eased slightly giving up 4 cents for the week to settle at 1,943 cents. The Au$ was slightly stronger at US $0.71, with the EMI in US$ terms gaining 1 cent to end the week at 1,383 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) declined by 4 cents to finish at 2,095 cents.

37,454 bales were offered for sale this week, almost identical to last week with the trade clearing 32,669. This is just 310 fewer bales than last week, however the pass-in rate was again significant at 12.8%.

In the auction weeks since the winter recess, 1,124,734 bales have been cleared to the trade, 217,993 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,812 bales per week fewer.

For comparison, in the first selling week of April 2018, 51,066 bales were sold.

The dollar value for the week was $66.18 million for a combined value of $2.621 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,025 per bale across all types for the week.

Crossbreds continued to defy the easier trend with an increase of 10 to 30 cents across the board. This is the third week in a row of price improvement, however the Cardings sector was mixed declining by 41 cents in Sydney but posting modest gains in Melbourne & Fremantle.

The week ahead

The roster for next week has the offering again at 38,712 bales followed by 42,465 before the Easter recess.

The recent pattern of buyers chasing after the small offering of quality wool, while at the same time finding an over supply of drought effected types continued.

While this pattern of supply is broadly following a well-worn seasonal path, the situation is at the current elevated levels because of the drought. It will take some time for this to flow through with wool shorn over the next 6 months at least also drought effected.

Auction volumes to the end of March make interesting reading, especially when broken down by category. AWEX figures show that comparing year on year the overall volume of wool offered for auction is 11.5% lower. However, as an example, the 16 MPG is 20.4% higher, with the 19 MPG 5.6% lower. However, as a result of the dry conditions, the big mover is the medium microns. The 21 MPG is down a massive 47.8% compared to last year; this helps understand some of the reasons for the current market dynamic.

To re-enforce the drought effect, AWEX noted that 30% of Merino fleece this week was yielding less than 60%.

The Eastern Market Indicator (EMI) again fell 16 cents to 1,947 cents. The Au$ fell back below the US $0.71 mark, with the EMI in US$ terms also losing 21 cents to end the week at 1,382 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) declined by 5 cents to finish at 2,099 cents.

37,405 bales were offered for sale this week, 5,724 less than last week with the trade clearing 32,979. This is 5,722 fewer bales than last week, with the pass-in rate remaining in double digit figures at 11.8%.

In the auction weeks since the winter recess, 1,092,065 bales have been cleared to the trade, 199,596 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,438 bales per week fewer.

The dollar value for the week was $67.22 million for a combined value of $2.555 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,038 per bale across all types.

Crossbreds again were the only category to see improvements this week, lifting 10 to 20 cents, however the Cardings sector continued to decline losing 30 to 40 cents.

The week ahead

The roster for next week predicts an offering of 38,212 bales followed by 35,945 and 41,055 in the weeks proceeding.

Last week, we had no wool trades but saw a couple of rare cotton forward agreements. This week, wool trades came back, with six agreements, most of these in the medium wool category. Looking back at forwards for this month, there was just 18 agreed trades, the lowest number since December and the lowest March total since 2016.

In the fine wool category, one trade was dealt for 19 Micron in April for 2,290¢. In the medium wool category, five trades were dealt for 21 Micron with two agreed at 2,250¢ in June, and three at 2,095¢ in October.

Looking at the Aussie Dollar trend since the start of March, we see a single small downward movement at the start of the month followed by a relatively stable curve, with a couple of forays above 71¢. In fact, today we’re nearly exactly at the same price as at the start of the month. Over the month we’ve seen a gradual overall cooling of physical auction prices that can be traced back to lower quality wools presenting more frequently.

The prevalence of poor quality wool has dragged the market down for a fourth week in a row. Lower style types were discounted by around 20 to 40 cents from last week’s base and this was enough to pull most individual Merino categories down.

AWEX reported that many of the lower styles also possessed poor additional measurements. These styles made up the highest proportional level of the Merino fleece offering since 2010. This week’s analysis piece looked into the drought implications on this seasons wool specifications and is worth a read (view here).

The Eastern Market Indicator (EMI) fell 16 cents to 1,963 cents. Improvements in the Au$, back above the US $0.71 mark, helped lift the EMI in US$ terms slightly. It rose 5 cents to end the week at 1,403 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) declined by 23 cents to finish at 2,104 cents.

43,129 bales were offered for sale this week, 2,344 more than last week with the trade clearing 38,701. This is 3,019 more bales than last week, however, sellers are still not satisfied with the market levels, passing in 10.3% of bales.

In the auction weeks since the winter recess, 1,059,086 bales have been cleared to the trade, 191,241 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year now sits at 6,374 bales per week fewer.

The dollar value for the week was $81.54 million for a combined value of $2.487 billion so far this season. A simple calculation of $ value divided by bales sold gives us $2,189 per bale across all types.

Crossbreds were the only category to see improvements this week. Gains of 10 to 20 cents were recorded in Melbourne. The Cardings sector felt the biggest cut of the week. Across the three indicators, declines of 30 to 70 cents were recorded from last week’s sales.

The week ahead

The roster for next week predicts an offering of 38,950 bales with further falls to 37,787 and 35,735 in the weeks proceeding. The lower offerings over the next few weeks may bring about added support for the better-quality wools. Whether there will be enough presented compared to the lower styles to lift the overall market remains to be seen.