Category: Wool

Despite a slight lift in volume of wool hitting the market this week prices managed to increase across most categories and centres. Looking ahead however, the roster indicates that the quantity of wool on offer is set to decline week after week.

AWEX reports claim that the forecast has led many exporters to attempt to secure volume while it’s available and sparked more aggressive buying behaviour this week.

The Eastern Market Indicator (EMI) ended the first day of sales flat, but increased 10 cents on the second day of selling, finishing the week at 1,944 cents. Last week’s Au$ rally came tumbling down this week, to 0.709 US cents. This saw the EMI take a harsh turn in US$ terms to close 25 cents lower at 1,380 cents (Table 1).

The market in the West showed much the same sense as in the East. The Western Market Indicator (WMI) gained 7 cents on the week to 2,101 cents.

The week saw a total offering of 39,894 bales come to market, with 7% passed in. This resulted in a clearance to the trade of 37,092 bales. The season to date has seen 992,742 bales offered which is short 176,735 bales compared to this point in the 17/18 season.

The dollar value for the week was $77.25 million, for a combined value of $1.97 billion so far this season.

Nearly all individual MPG’s saw gains in each selling centre this week. The only category to have taken a hit was fine wools in the South, which saw losses in the range of 5 to 25 cents. Fine wools in the North were a different story. Holding its first designated Superfine sale for 2019, the Northern region saw 16.5 to 18 micron wools lift 40 to 45 cents higher on the week, having received strong support for the event.

The Crossbred market continued its strong performance. 28 to 30 MPG’s were the most keenly sought after, with gains of 20 to 40 cents. Merino skirtings held firm across the centres, with limited offerings. The cardings indicators dropped back slightly in the East this week, while remained unchanged in the West.

The week ahead

Next week 39,520 bales are rostered for sale across the three centres on Wednesday and Thursday. This is only slightly reduced on this week’s volumes; however, a trend of declining supply is forecast. 38,205 and 35,275 bales are rostered for weeks 34 and 35 of the selling season respectively.

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.

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.

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.

All of the action this week was in the 21 micron category, where the fine prices set on grower orders are lower than the current auction prices, but on par with fine trades to mid-2019 over the last few months, signaling confidence in a stable market.

One trade was dealt for May 2019 at 2,165¢/kg and three trades were dealt for June, all between the 2150 and 2160¢/kg marks. This confirms that buyers and sellers are relatively comfortable in that price range for the first half of the year.

Last week we saw some interesting developments in coarse wools with bids close to auction levels. This is still the case and it might be worthwhile for growers to lock in prices for mid-year. We are keen to see some action in other fiber lengths in the coming weeks.

The last 3 weeks of sales have seen big volumes of wool on the market. Now the normal story would be a hit on prices, but results have been curiously stable.  

The Eastern Market Indicator (EMI) rose 13 cents on the week, ending at 1,923 cents. The Au$ compared to the last week was slightly weaker at 0.715 US cents. That put the EMI in US$ terms at 1,375 cents, a rise of 4 cents (Table 1).

In the west, the Western Market Indicator (WMI) also rose over the week to end at 2,105 cents, up 22 cents on last weeks close. WA saw prices up in all MPG’s.

This week saw the largest offering of the season to date and even since April last year, with 51,703 bales on offer. Growers passed in just 6.7% of bales offered, resulting in a clearance to the trade of 48,227 bales. Over the last 3 sales, we’ve seen 135,017 bales sold and while that might seem significant, in comparison to the same 3 weeks the year prior it’s down 11.24% or 17,102 bales fewer.

The dollar value for the week was $101.26 million, for a combined value of $1.748 billion so far this season.

Prices were fairly mixed between Melbourne and Sydney. Fine wool struggled to find it’s feet in the north while it was the mid fibres and superfines that saw corrections in the south. Cardings also participated in the mixed market with 20 to 30 cent gains in Sydney and Fremantle, but a 5 cent drop back in Melbourne on the week. Crossbreds were the best performers for the second week in a row, with gains of 50 to 80 cents for 26 & 28 MPG.

The week ahead

The large offering and stabilising market over the last few sales points to positive times ahead.

We are due for a reduced national offering in the coming sales. Next week there are 41,503 bales rostered, with all centres selling. The following weeks have 37,995, then 37,005 bales rostered.

A bit of action was seen in the 19 and 21 micron categories to kick off 2019 for the wool forward market and some interesting developments in the coarse wool forwards gave growers a chance with crossbreds to get some cover at great levels.

In the 19 mpg trades two trades were dealt for March 2019 at 2240¢/kg and October 2019 at 2140¢/kg.

The 21 micron class saw orders filled between 2150-2160¢ for a June 2019 maturity.

In the 28 and 30 micron bids have come in to the market that are quite competitive and providing growers a chance to look in at levels very close to the auction market all the way to June 2019 – something for growers to consider.

In this series of blog articles, we’re taking a look back at the year that was for agricultural commodities and provide our insight for the year ahead. This instalment highlights 2018’s key movements in the wool market and what to keep your eye on in 2019.

In the calendar year 1.599 million bales were sold, 182,000 fewer than for 2017. This reduction has only become a factor from July 2018 onwards with the drought impact on wool cuts and sheep numbers resulting in 177,000 bales less sold compared to the corresponding previous six-month period in 2017.

There was also a response from wool producers to the softer market and they were prepared to take a bullish stand on prices.

As with all sheep producers, wool growers have now for some time received the benefit of good sheep prices as well as prolonged strong wool prices contributing to strong income flows – this allows wool sellers to hold wool in store if they view prices as soft and likely to recover due to supply constraints.

Despite its early bravery in October, the EMI was unable to sustain the heady 2,000¢ plus levels, eventually slipping 151¢ to finish the calendar year at 1,862¢. In US$ terms it also retreated, dropping 115¢ to 1,346¢.

While November had the EMI briefly below 1,800¢, resistance to meet the market from wool producers produced a recovery which was maintained to the end of the selling year.

Reflecting on the calendar year, the EMI posted a 5.8% increase; however, this mirrored the fall almost exactly in the Au$, the EMI in US$ terms in fact is slightly lower compared to January 2018.

Moves in individual MPG categories were also impacted by the drought on the east coast; the resulting increase in fine wool constrained the finer end of the clip while reducing supply (again predominately drought-related) in medium wool MPG’s assisted the price.

The best performed were the 20 to 23 MPG’s, while the worst included Superfine types (oversupplied), 26 & 28 MPG (lack of supply reflected in reduced demand) and Cardings which have now lost all of the lustre they exhibited on their spectacular run upwards.

What to keep an eye on in 2019

1. Continuation of supply pressure

It is unlikely that 2019 will see any change to the trend of reduced supply, as large-scale abattoir throughput of mutton sheep points to a continued destocking in drought areas. This combined with the continued dry period negatively impacting on fleece weights will retain supply pressure on the market.

Any rain-induced supply increase will take time to come through (it doesn’t rain grass!), and while growers restocking by holding onto more ewes will occur post good rain, it will also take time for the flock to grow coming of this low sheep number.

2. Merino prices outperforming the general apparel fibre markets.

All MPG’s 23 & finer are trading above 2,000¢, and with only the Cardings indicator and 30 sitting just below the 90 Percentile level. All other types are trading at levels experienced for less than 10% of the time since 2004.

The 19 MPG at 2,248¢ (end of December) has been below this level for 98.2% of the period measured from 2004, and therefore only 1.8% of this period above the current market level.

Percentiles don’t forecast the future price levels, but they do provide a view of where a price sits from a historic perspective, confirming that this is a very good time for wool prices. That does not mean prices cannot fall, as that depends in part on the general movement of apparel fibres which have been weakening this season.

3. Short fleeces on the rise

Shearing at shorter intervals continues to be popular. The annual supply of short length Merino combing wool (50-69 mm greasy length) as a proportion of Merino combing fleece volumes from the mid-1990s onwards has taken a sudden increase in recent times.

Farmers are good at responding to price signals and the increase in supply of short length Merino fleece since 2015-2016 fits with a delayed response to the minimal discounts for short length wool which started in 2013. The fashion cycle has turned, as it usually does, and discounts for carding length wool have reverted to pre-2013 levels. Short length Merino fleece discounts will have to contend with both this change in cardings price levels and a continued increase in supply in 2019, which should see discounts widen, especially in mid-2019.