Wool was the hot topic of industry conversation again this week but it wasn’t enough to distract the market from deciding on what fibres it wants to support. Results were particularly mixed with fine fibres attracting premiums whilst the rest of the categories felt losses.
Overall, the market indicators held reasonably still considering there were very mixed results between categories. The Eastern Market Indicator (EMI) improved slightly on last week, gaining 2¢ to 1,568¢ in Aus$, while in US$ terms it rose 7¢ (figure 1). Western Australia fared worse off with the Western Market Indicator (WMI) falling 7¢ to 1,614¢.
There was a distinct preference split between fibre categories across the country this week. The total market has been moving in sync for much of the last few months so this divergence could be a return to greater differentiation between the activity of wool types. Finer fibres of 19 microns and under all received price gains on last week, up to 45¢. Buyers were clearly chasing the finer microns as reflected in the solid trend of the finer the micron the increase in price gains to the week.
On the other hand, medium to coarse wools of 19.5 to 23 MPG weren’t as readily sought after. Prices fell on average 20 to 30 ¢ by the weeks close. Crossbred wool followed the lead of the medium to coarse Merino fibres, losing ground across the board. The harshest fall was in 28 MPG at an average drop of 30¢ in both Fremantle and Sydney markets.
Again, the finer fleece led by example to the skirtings and cardings market. Improvements were on average 20 to 35¢ for cardings indicators and generally ranged from 30 to 60 cents for skirtings. .
45,792 bales were traded this week, with a pass-in rate of 6%. We’re still seeing the offering at much higher levels compared to this time last year (up 11.8% for week 16 this year), reflecting the performance of this season.
The week ahead
The number of bales on offer next week is expected to drop down to a listing of 43,764 for the three selling centres over Wednesday and Thursday (figure 2). The focus on micron this week might be an indication of where the market is starting to move to. Some strong forward prices in the 18.5 and 19 micron wools where buyers were willing to pay a premium out to next year suggest that preference for the finer wool is likely to grow.
The continued good news regarding the wool market is providing a positive setting for wool producers; with some now locking in prices for future clips and making decisions to expand production. A quick look at relative prices shows the EMI is 248 cents higher year-on-year, while in US$ terms it is up 231 cents.
This week the market opened strongly on Wednesday then settled into a “firm” trend resulting in a good result for sellers; and they responded by only Passing-in 3.3% of the 38,103 bales offered- well below the season average of 7.3%.
The scramble for “low mid break” lots resulted in these types at times posting extreme prices. AWEX report that up to 70 cent premiums are evident for wool with the “right” specifications. This is a response to the 
Despite an increasing offering that is normal as Spring shearing clips arrive, it is difficult to see anything but positive times (at least in the short term) for wool.
The “steady as she goes” reports on the wool market activity over recent weeks were thrown out the door at this week’s 2 day wool sale, with the market lifting significantly led by the Merino and including Cardings sections. 
An overall satisfactory wool sale result this week, however we need to acknowledge that the weaker A$ played a part. Last week the A$ touched out at US$0.80, whereas this week it closed at US$0.782. Causes for currency moves are varied and debatable, and we can’t be sure if the weakness in the A$ is anticipating a Tigers/Crows win or loss in the AFL; or perhaps it is due to the struggle NSW NRL fans are having coming to terms with a Cowboys/Storm final?
A key point of interest in the wool market is the fine wool price, including the fine wool price relative to medium wool.
Of course, this leads to comparisons of relative price levels. Figure 2 shows the basis or spread between the 18 & 21 MPG’s for the Southern selling region. Currently the 18 over 21 MPG premium is sitting nicely at 554, having briefly touched the high level of over 700 cents in March this year.
The market looks remarkably stable at present, and providing we don’t see a sudden surge in the A$ this should translate into another good week to be selling (that is providing the footy community can cope with an all Victorian result!!!)
In commodities, and particularly in agricultural commodities, a stable market is generally a good sign, especially if the market is at the top of its recent trading range. The wool market can best be described as “steady” this week, however, as usual there were some exceptions with the fine wool and crossbred selections in Melbourne underperforming the market.
A total of 40,699 bales were offered for sale this week. The steady market encouraged growers to more readily meet the market, with the pass-in rate of 6.9% well down from last week’s significant 15.5%. (Figure 3).
The market has been a bit “bouncy” up to this week, we wouldn’t predict either stable or unstable for next week, its “one of those times” in the wool market!
The Eastern Market Indicator dropped down 31 cents to 1,525 cents in A$ terms this week (Figure 1). The market in the west followed a similar path, falling 30 cents out to 1570 cents close (Figure 2). Our dollar is still holding up against the US$, which meant the EMI fared slightly better in US$ terms finishing 22 cents lower on the week at 1221 cents. The A$ traded at 80.5 early and pulled back as the week progressed which was reflected in the market as prices stabilised on the second day of auctions.
Merino skirtings and crossbred wools also felt a quick early blow in the market before stabilising on day 2. Recovery was slightly better than for Merinos, with losses of 15 to 30 cents for crossbreds and an average of 20 cents on skirtings. Cardings were the only category that managed a positive move by gaining just a few cents on the week.
The EMI fell only 2 cents in A$ terms to settle at 1,556 cents, while in US$ terms the market improved 12 cents over the week (figure 1). The WMI was 9 cents lower than the previous close of last week.
This week was a pretty good result considering a larger offering and a higher A$ could have pushed the market lower following the last couple of weeks of price corrections. It wasn’t the case however, and growers responded by clearing the large offering and only passing in 5.2%.
Through the looking glass into next week, another large offering of 44,281 bales are rostered for sale in all three selling centres (Figure 2). The solid performance this week in the face of a large offering and stronger A$ bodes well for next week.
During this period in the wool market, it seems to be performing as a more predictable beast than usual. Market rallies strongly – growers sell – buyers lose orders because market is “too hot” – market retraces – growers pass-in higher levels – market recovers – buyers receive increased orders – market rallies …….. repeat!!
The underlying story for this week however is positive, the market opened on Wednesday with “red ink” across the board, but a reversal on Thursday was clear, with gains of 10 – 20 cents across all microns and the market finishing on a positive sentiment.
Next week 42,872 bales are rostered (Figure 2). The pattern over recent months of correcting but quickly recover as growers hold wool back from sale was again in evidence this week. This suggests that next week will see a continuation of the positive sentiment evident towards the end of this weeks sales.
The optimism that was evident following the last two weeks of strong wool market sales suffered a reality check this week. With the market only selling in Melbourne & Sydney, and with the sale conducted on Tuesday & Wednesday due to “Wool Week” activities, it was a sharp correction across all types that occurred.
The response from growers was to pass-in14% of the offered wool, resulting in 32,342 bales sold for the week, well down on the average for this season. It is an interesting situation with the market trading at historic highs and yet we have a pass-in rate that is high by any measure. Growers are clearly comfortable holding out, despite these historically good prices, suggesting their not too concerned that any major correction will occur in the near future.
Next week Fremantle rejoins the selling roster and 44,750 bales are rostered (Figure 2). The pattern over recent months has been for the market to rally, then correct but quickly recover as growers hold wool back from sale. This is likely to be the pattern going forward so next week there is an air of optimism from sellers that we can see the market at least hold.
Last week the market kicked off for the season with full force and we expected week 2 to be a little lacklustre in comparison. But no, the Australian Dollar plunged, the auction price peaked and those with the patience to hold on past the first week came out grinning.