Category: Wool

The wool market bubbled along at the higher rates reached last week, however, AWEX reported that this week buyers reverted to a more selective approach, in contrast to the past couple of sales where faults were overlooked.

Wool that exhibited good measurements & style (high tensile strength & low mid breaks) once again attracted strong bidding albeit on a limited supply.

The AU$ improved another US$0.01 over the week, this weighed on the buyer bids with the EMI losing AU$0.17 cents but gaining US$0.03 for the week underpinning the strong market sentiment. W.A. fell also with the WMI giving back 28 cents, closing the week at 1860 cents.

The exception to the general across the board falls were the fine microns, with Sydney & Melbourne for example posting gains for the 17 MPG of 37 & 16 cents respectively.

An interesting note is that in Sydney at the halfway mark of day one of selling, zero fleece lots had been passed in; a recognition by sellers that these are good prices to be taken up.

The Skirtings section tracked a similar path to the fleece, although low VM lots were quoted as stronger, especially for 18.5 micron and finer. This is a continuation of the theme that has been building in recent months; with the market at very high levels the discounts for secondary types such as tender fleece and skirtings fade away. This week the selective approach by buyers returned.

The result was that again best style wool was keenly sought while faulty types were quickly discounted.

As outlined in Mecardo analysis this week, the merino pieces price follows the general story of the faulty type and is some 600 cents above the 2001 levels, while the 18 micron locks price is some 150% up on the 2001 level.

Positive news from the cotton market emerged this week, India is responding to supply concerns by reducing exports which is expected to improve the prospects of US prices. The cotton market has been rising strongly and this week is just shy of its 8-month high point.

This week Mecardo had a look at the wool production estimate on the back of the Australian Wool Production Forecasting Committee report. Sheep offtake rate continues to be supportive of an increase in sheep numbers, with flock modelling pointing to an increase in the flock size in 2018-2019, due to the high wool prices in relation to the wheat price.

However, the projected rise in sheep numbers is only a modest 2.6% next season.

The week ahead

Based on previous wool producer responses, any reduction in price levels will see the pass-in rate jump; growers have been bullish over recent times and are prepared to hold wool back in this market of “just in time” supply.

Along with strong demand, the limited supply of fresh wool combined with wool grower’s optimism the market is unlikely to retrace any time soon.

Next week 43,297 bales are rostered for sale across the three selling centres. It is of note that 50,499 bales were cleared to the trade this week.

The Christmas spirit continued this week in wool sales with buyers bidding strongly from the Tuesday opening, before becoming slightly more subdued on Thursday. This resulted in strong week-on-week increases across the board, with the 32 MPG in Melbourne the only one to miss out.

This pushed the EMI to a new high of 1760 cents, adding 405 cents for the year – an outstanding 29.9% improvement.

Despite a slightly stronger Au$, the market improved 67 US cents for the week underpinning the strong market sentiment. W.A. didn’t miss out either with the WMI lifting 54 cents, closing the year at 1816 cents.

The total value of wool sold in the calendar year surpassed the $3.0 billion mark, this being the first time since 1995 when AWEX records started.

The increases year-on-year are impressive and worth noting, the EMI lifted 30% in Au$, while in US$ it was up 34%. To select a couple of other star performers, the 16.5 MPG rose 48%, 18 MPG plus 35% and the median wool clip 19 MPG was up 29% on the year ago levels.

Cardings have continued to “outperform”, posting a 32% gain for the year to end at almost 1500 cents.

The outlook for 2018 is positive, as brokers report that some wool growers have already shorn and sold wool that would have usually only came to the market in the January to March period. It seems a combination of more frequent shearing patterns and the attraction of higher prices has pulled wool deliveries forward. While the full extent of this is unclear, any reduction will have a tightening effect on supply in the New Year which will keep buyers keen.

The week ahead

The market now takes a 3-week break with sales resuming in the week beginning the 8^th of January.

There will be wool growers who have delivered wool to store for sale in the New Year eagerly looking forward to the opening sales.

It is a time for optimism with returns from Merino sheep at levels rarely seen, giving the industry a timely boost that hopefully sees an increase in wool production.

Christmas presents came early for wool sellers this week with a strong “across the board” result in all three selling centres. The strongest evidence of woolgrower satisfaction was the low pass-in rate of just 3.1% nationally.

It was noted in AWEX reports that “buyer interest intensified” to capture market share with only one selling week remaining prior to the Christmas recess.

The benchmark Eastern Market Indicator (EMI) gained 23 cents to close the week at 1699 in Australian dollars (a new record), while despite an easier Au$ level a similar story resulted in a 11 US cent increase. The good news was also evident in the West with the WMI lifting 37 cents closing the week on a strong note.

Main interest focused on well measured wools, and skirtings with low VM content were also keenly sought. However, such was the enthusiasm to secure volume by exporters that the lower spec wools were also carried along and posted similar improvement.

While the prices increased for all MPG’s, it was the 18.5 and broader that stood out. In fact, this week it was the Crossbred and Cardings with the largest price lifts. 28 MPG in Sydney was plus 54 cents, while 30 MPG in Melbourne gained 58 cents, a 10% lift for the week!

Tagging along the good news examples was the W.A. 20 MPG category that showed a lift of 52 cents.

This year has been terrific for anyone selling wool, demand is strong, the Au$ is steady and buyers are finding plenty of orders to account for the weekly offering. Next week we will compare the various wool categories price movements for the year, but for now, wool producers can certainly celebrate a year to remember for the wool market.

The week ahead

The bale offering over the last few weeks has been sizeable, with 49,000 bales again cleared to the trade. Next week is the last sale for 2017 before a three-week recess with 52,300 bales to be offered.

We expect that the Christmas cheer will again be in abundance next week as exporters bid strongly to secure supply. There is a school of thought that the first half of 2018 might provide less volume due to earlier shearing patterns, if this is the case the market is likely to remain solid for some months at least.

With the Christmas recess looming the market regained some upward pressure this week as exporters tried to lock in their requirements. Fine and medium fibre prices built up gradually across the sales, while most of the crossbred market moved into negative territory.

The Eastern Market Indicator (EMI) gained 7 cents to the week in Australian dollars, but when converted to US dollars, felt just a 1 cent increase. The story was similar in the West with the WMI lifting 8 cents.

Results from the superfine sale in Sydney this week were positive with a 36 cent gain for 16.5 micron fibres. This was the best result on the board with the other fine categories ranging from slight retractions to an average 20 cent gain. Medium fibre (19.5 to 22 micron) prices managed to correct themselves from the levels of the week prior. Rises of 15 to 25 cents were common at all three selling centres. Most microns and categories in the skirtings market received support in line with the gradual increase of the fleece market.

The crossbred market failed to bounce back like the Merino market this week. Prices continued to drop in the margin of 10 to 25 cents, particularly for lots that were poorly prepared. Locks and crutchings managed to attract some stronger prices in the oddments market and we saw washing lambs at extreme levels for the finer lots. The cardings indicators moved up slightly, with an average 3 cent increase across the three selling centres.

The week ahead

The bale offering over the last few weeks has been sizeable, and this is set to continue with 50,828 on offer next week. There has been discussion that the good market has driven a lot of growers to pull their shearing dates ahead of schedule this year. Given the offering we’ve seen over recent weeks, It looks as though many growers are running about a month earlier than on a typical year. If this is in fact the case, we expect that supply will drop out slightly in the new year.

After weeks of a glowing market that seemed to keep on rising with record on record, the peak was finally reached and the market edged over the other side. Nearly all categories and microns across the country retracted on the week, however it wasn’t enough to cause too much concern.

The Eastern Market Indicator (EMI) dropped 14 cents on the week to 1,669¢. The weakening Australian dollar has meant the retraction was not quite as strong in US dollar terms, with just a 9 cent drop to 1,270¢. The Western Market Indicator fell just 8 cents on the week to 1,717¢.

The bale offering this week was substantial at a total of 48,409 bales. With the consistently high trade offering over the last few weeks AWEX reported that it has reached the point where buyers were able to be more selective with their purchases. The word on the ground from exporters suggests that the softening market this week is being led by offshore clients pulling back slightly due to tightening credit. The responding retraction in prices saw a bump in the percentage of wool passed-in this week. It rose 3.2% from last week to 6.4% of bales passed-in.

The finer micron wools still appear to be reacting most to any change in the market. The largest price correction was for 18.5 micron, which dropped 35 to 50 cents in the East over the week. Medium fibre wools (19.5 to 22 micron) lost on average 10 to 30 cents, while crossbred wool again demonstrated its volatility in a wide range of results. The finer crossbreds held slightly, to a loss of 10 to 20 cents, but 28 and 30 micron prices suffered on average 40 to 60 cents drops.

Skirtings followed the movements of the Merino market showing reductions ranging between 20 and 40 cents. The cardings indicator managed to retain some stability in the East on the week, and even posted a gain of 15 cents in the West.

The week ahead

Next week a huge offering of 51,982 bales is tipped across the three selling centres. Significant volumes are expected for Sydney and Fremantle which are providing most of the boost in next week’s offering. Sydney will be holding a designated Australian Superfine Sale on Wednesday and Thursday.

What a week, Rekindling wins the Melbourne Cup while the wool market catches fire! If we thought last week was good when the EMI jumped 45 cents, this week the increase was 58 cents – more than a 6% increase in 2 weeks.

The Eastern Market Indicator (EMI) finished the week at 1,681¢ with AWEX reporting this another new record high in Australian dollar terms. The Australian dollar was slightly lower over the week, with the EMI in US$ terms posting a rise, also of 40¢ to end the week at 1,293¢. The EMI in US$ terms is edging higher, however it is still well off its previous record of 1504 cents set in July 2011.

Only 1.3% of the offered bales were passed-in, resulting in 42,846 bales cleared to the trade. Slightly fewer bales were offered compared to last week and therefore fewer sold, however this volume is as expected with the spring deliveries arriving, so all in all this clearance is a good strong market signal.

Looking at the market, demand was excellent with AWEX reporting lots “across the whole Merino spectrum were hotly contested”. It was also noted that discounts for “wools with inferior test results” disappeared as buyers scrambled to secure market share.

Some of the stand-out performers deserve special mention; the Cardings indicator lifted on average 63 cents across the three selling centres, to post a record level. It’s worth reflecting to compare to the dismal days of 1999 when the Cardings indicator bottomed at 236.

Another sometimes over looked type is the 32 MPG, this week it lifted 81 cents or 20%, an extraordinary move in one week.

In fact, the entire crossbred range lifted by 50 to 80 cents, slightly over shadowing the strong rise in the Merino section in a week of records.

The forward market as expected also kicked into gear, with buyers showing confidence in the near-term outlook by bidding out as far as August 2018; as an example, 19 MPG for July 2018 traded at 1870 cents.

The week ahead

49,486 bales are rostered for sale next week across the three selling centres (Figure 3). The roster lists 41,000 and 44,000 for the following weeks. It’s hard to see that this future offering will have a negative effect on the market following this week’s bull run.

We’ve ticked over the billion-dollar milestone for total value of wool sold this year which is something of an achievement. At this point in the season last year the value was 26% lower than it is today despite the cumulative bales sold being just 10% lower.  The wool market hasn’t reached this mark by week 17 since 2002.

The Eastern Market Indicator (EMI) rose 10¢ on the week to 1,578¢ in Australian dollar terms. However, the falling Australian dollar has put some real pressure on the EMI in US dollars. It saw a drop of 13¢ to the week back to 1,218¢. This is a win-win situation, with Australian sellers receiving a higher local price and overseas buyers getting more “wool for their buck”. The Western Market Indicator also supported by the shifting currency by rising 20¢.

Sales were fairly strong across the board, with the real achievers again being in the fine wool category. Wool 19 MPG and finer gained between 35 and 45¢ in the Northern market while similar rises were only received for superfine wool (16.5 MPG) in the Southern Market. Premiums for fine fibres over medium fibres this season have been significant- Figure 1. Prices across the rest of the Merino market were generally positive, rising on average 10 to 20¢.

Crossbred fibres took another hit this week as all buyer interest seems to be mounting on finer fibres. Price reductions were mostly between 20 and 40¢ while the better prepared lines managed to attract a little support.

The skirtings market had another solid week seeing gains of 20 to 50¢. Buyers were particularly happy to pay more for low vegetable matter. Cardings indicators rose 30¢ on average across all three markets.

The response from growers this week was to pass in 3.2% of the offered wool, resulting in 43,473 bales sold. This is a slight retraction on last week but still considerably higher than last year.

The week ahead

47,266 bales are rostered for sale next week across the three selling centres (Figure 2). Melbourne is set for an extra day of sale on Tuesday, while Sydney and Fremantle are operating Wednesday and Thursday as usual.