Tag: Sheep

Across the board the Australian wool market Micron Price Guides (MPG’s) were all quoted higher, the only exception on the AWEX Wool Market Report was the Cardings indicators.

The MPG Indicators however failed to provide the whole picture; underneath the headline report is a more complex story.

The most significant factor in this week’s market was the Au$; by the end of the week it was quoted down US$0.013, sitting below US$0.78 for the first time in 2018. As a consequence, the Eastern Market Indicator (EMI) rallied by $0.08 for the week to close at 1820¢. This picked up all the fall of last week. As well, the Western Market Indicator (WMI) improved 16 cents to finish at 1895 cents.

To complete the currency story and its influence on this week’s market, the EMI in US$ terms fell 17 cents, this meant a cheaper week on week for buyers, and better prices for wool sellers thanks to an easing Au$.

There is another underlying story, at this time of the year there is more “faulty” wool on offer. Lots with higher VM have been steadily increasing, which results in these types receiving erratic competition. There is another side to this story, and that is that FNF types (wool with less than 1% VM), are increasingly difficult for buyers to source and at times extreme prices are bid for particular lots.

The issue of quality has also permeated into the X Bred section of the market. In the past couple of years, it has been the trend to spend less time preparing X Bred wool in the wool shed, with some producers electing to either not skirt or minimal skirt in their wool preparation. When the market is buoyant or under tight supply this preparation model has little impact on prices, however, when the demand softens or supply increases (both currently the situation with X Bred wool), buyers can overlook less prepared types. This is the case now. Buyers can fil orders with “traditionally” prepared wool; poorly prepared lots are then used as bargain buys to cheapen orders.

Of the 41,815 bales originally offered, 39,429 sold with a Pass-in rate of 5.4% or just 2,240 bales.

The week ahead

Sales are scheduled for all three centres next week on Wednesday & Thursday.

A total of 44,506 bales are rostered for next week, slightly more than this week’s offering; the roster drops away over the following 2 weeks with 41,500 and 39,100 anticipated.

Sheep and lamb markets made a bit of a comeback this week. Lower prices had the usual impact, seeing more growers keep their sheep at home, forcing processors to pay a bit more for lambs and sheep. 

The spectre of rain, and of course lower prices put a fair drag on supply this week. Producers baulked at lower prices, with lamb yardings falling 27% to their lowest full week level since mid-September (figure 1).  Sheep yardings took a similar fall, but have been weaker at times this year.

It’s nice when economics work the way they are supposed to. The lower supply saw prices move higher, the Eastern States Trade Lamb Indicator (ESTLI) gained 19¢ to close Thursday at 619¢/kg cwt (figure 2).

Lamb prices are in fact, very similar to last year. However, last year they had jumped 100¢ from December and any lamb that was ready was coming to market, there just wasn’t many finished lambs. This year prices have tanked from December, and growers don’t like lambs at 600¢. It interesting how price expectations can change in a year.

Restocker lamb prices have fallen in line with the ESTLI (figure 3). Lower prices now don’t necessarily mean prices will be steady through autumn, but the market always reacts the same way. If we have indeed seen the price low, it might be a good time to buy store lambs.

Over in the West sheep are the most expensive in Australia, the indicator at 400¢/kg cwt, while Merino lambs had an extraordinary jump, gaining 126¢ to 635¢/kg cwt.

The week ahead

Again it is forecast to rain in Queensland, but some key parts of Northern NSW might get some too this time.  After a dry summer this might be the trigger for a supply pull back, with the ripple effect flowing south.

We don’t expect a strong jump in lamb prices this week, but it’s also hard to see supply ramping up far enough to see values fall back below 600¢.

Strong throughput numbers for both lamb and mutton across the nation this week saw falls recorded in all national sale yard indicators, ranging between 3$ to 9 %.  The headline Eastern States Trade Lamb Indicator (ESTLI) dropping 9.4% to close at 601/kg, while mutton was equally weak, off 8.8% to 385¢.

The East coast sale yard indicators mostly mirroring the national falls, with many categories posting declines between 2% to 12%. In Victoria, Merino Lambs the weakest, falling 9% to 558¢, while in NSW Restockers took the heat with a 12% drop to 598¢.

Victorian and NSW lamb yardings shown to be running above average for this time of the year and this saw East coast throughput lift 33% on the week to sit 28% higher than the seasonal average for this time in the year – Figure 1.

Higher NSW mutton yarding the key behind the elevated East coast figures too this week – figure 2. NSW sheep thoughput currently 34.7% over the seasonal average level for this week in the year and the added numbers of mutton has pushed the East coast levels over 100,000 head this week, an 18.7% gain on the seasonal average.

Western Australian indicators for Merino Lamb and Mutton were particularly soft, both off 19% to 509¢ and 370¢, respectively. High throughput the likely culprit there too with WA mutton yarding levels showing a solid surge this week with 27,000 head recorded – an increase over the seasonal average of 66.3% – Figure 3.

What does it mean/next week?:

A wetter week is anticipated, particularly in the West, and this should stem some of the price declines experienced by producers this week. The BOM have forecast a higher chance for a wetter than average February and there hasn’t been much for the East coast for the first few weeks of the month – perhaps that means the second half of the month we will be some decent falls… fingers crossed.

This was a week of “toing & froing”; in early sales buyers tested the market to see if some of the gains from last week could be taken back. However, by the end of the week, buyers were forced to re-engage to secure volume.

A small catalogue of Merino fleece wool (AWEX reported the smallest Merino fleece offering since March 2016), and growers preparedness to pass-in around 8% of the offering eventually forced the hand of buyers.

Of the 42,500 bales originally offered, only 39,201 sold. The Pass-in rate was 7.8% or 3,318 bales.

The A$ was quoted up for the week to sit above US$0.79 at the close of selling. This contributed to the Eastern Market Indicator (EMI) falling by $0.06 for the week to close at 1812¢. After last week’s massive 102cents lift, The Western Market Indicator (WMI) gave back 42 cents to finish at 1879 cents.

The underlying strength in the market was evidenced by the EMI rising US$0.14 for the week due to currency movements.

Again, we have seen evidence that by passing-in lots, sellers are able to exert influence in the market to support wool prices when the market softens. Buyers have little option but to bid the market up to fill orders as there are scarce supplies of wool floating around the system.

In general, Cardings and Crossbred types had a good week, posting gains in all centres except for W.A., although in the West any types finer than 17 microns experienced “extreme” demand with up to 100 cent increases.

Growers need to take care with “off-type” wool; lines with low staple strength, high mid-breaks or excessive VM levels are the most effected in the current market. When the market rallies and buyers are scrambling to fill orders, faults are over-looked and prices for lesser quality wools are excellent.

However, when the market eases, these types are the most effected. Conversely, wool exhibiting good measurement holds value in an easing market due to the shortage of these types to fill existing orders.

The week ahead

Sales are scheduled for all three centres next week, with Melbourne selling on Tuesday, Wednesday & Thursday while Sydney & Fremantle will only offer on Wed & Thur.

A total of 41,815 bales is rostered, only 1,000 bales less than this week’s offering but more than the clearance of 39,000.

This AWEX report probably summed up the sentiment of the wool market this week – “The recent wool market decline halted in stunning fashion”. Every one of the AWEX reported indices posted an improvement, some of the increases had to be seen to be believed.

The A$ also contributed and was quoted down 2.25 cents to US$0.7825 at the close of selling, helping the Eastern Market Indicator (EMI) to rise by $0.80 for the week to close at 1818¢. The Western Market Indicator (WMI) rose a massive 102cents to 1921¢ – figure 1.

To put this in context, the previous peaks were reached in the first sales of this year, then the EMI hit 1818 for the first time, while the WMI was quoted at 1888. To underline this recovery, the EMI in US$ terms is just shy of its 1434 peak in January at 1423. This has been an unprecedented reversal of the price declines of the last couple of weeks and reinforces the volatility of the market.

There are some interesting factors with the various indices; if we take Melbourne quotes as an example the 18 MPG on the opening sale week in January was quoted at 2363, it fell to 2225 over the following 2 weeks, and this week it sits at 2363; all this movement occurring over 4 selling weeks.

The 21 MPG over the same period started at 1800, fell to 1765 and now sits at 1891.

Cardings turned around their downward trend also, posting strong gains in all centres however of note was Melbourne and Fremantle, where gains of 100 & 120 cents respectively were recorded. Crossbred also joined in with 40 – 70 cent gains common.

Growers passed in only 2.1% of the offering in a positive response to the market.

This is a time for sellers to act in the wool market, fresh shorn stocks need to be baled and trucked to store for testing as soon as possible, and wool in store should be sold, either at auction or on Wool Trade.

Growers then should discuss forward sales with their broker representative. It’s not a question of whether sales should occur or not, these prices are unprecedented. The discussion needs to be around how much to lock in, and what is the best contract to use; these are questions that will have unique answers for each wool producing business.

The week ahead

Tasmania will eagerly look toward their traditional February special sale next week; while growers and brokers may have been nervous over the past couple of weeks, as it turns out the timing could not have been better.

Sales are scheduled for all three centres with Melbourne selling on Tuesday, Wednesday & Thursday while Sydney & Fremantle will only offer on Wed & Thur. A total of 43,000 bales on offer, almost 5,000 bales more than the clearance of 38,700 of this week.

This week the wool market appeared to draw breathe after the sharp falls of the previous two weeks. It was the fine end that fared the best, and of note was the strong competition for sound wool with low mid-breaks.

The higher A$ saw only a 1 cent fall in US $ terms, while the Eastern Market Indicator (EMI) ended the week down 6¢ to close at 1738¢. The Western Market Indicator (WMI) also eased marginally to register a 2¢ decline to 1819¢ – figure 1.

While the early sales for the week had buyers again showing caution causing the market to open weaker, by the end of the week a more positive tone had emerged. This was especially noted in the fine wool types (17MPG +21 in Sydney & +14 cents in Melbourne), as well as the mid micron categories. The 21 MPG in Melbourne improved 33 cents for the week while in Fremantle AWEX quoted the 21 MPG up 10 cents.

Since the market peak in the first sale of this year, the EMI is down 4.4% although in US$ terms it is only 2.2% of the peak. The 17 MPG is in fact higher, up 1.4% %, while 19 MPG is 3.5% weaker.

Cardings again were out of favour losing 30 – 40 cents, now having accumulated a drop over the last 3 weeks of 280 cents, a massive 21% down from the first January sale.

Growers passed in 7.6% of the offering. 42,000 bales were rostered, however only 39,500 were offered with 36,584 bales sold. The past 2 weeks sales of 36,500 bales have been the lowest auction clearances since last September.

A review of export destinations for the year to date reinforces the reliance the wool market has on China. 74% of all wool exported has been to China, with India taking 6% and Italy and the Czech Republic taking 5% each.

The week ahead

The weaker market has seen the numbers cleared to the trade fall to the lowest weekly total since September last year, well below the season average of 42,300 per week.

Sales are scheduled for Wednesday and Thursday next week in all three centres with a total of 40,000 bales on offer. Sydney has a dedicated Superfine sale.

After a significant spike to throughput for sheep and lamb at the start of January yardings figures have returned back within the normal seasonal range, combined with cool temperatures and a bit rain, prices have managed to hold firm for most categories of sheep and lamb this week.

The ESTLI barely changed, rising a slight 4¢ on the week to close at 637¢/kg cwt, similarly National mutton gained 4¢ to close at 407¢/kg. Table 1 highlights the Eastern States closing prices yesterday for a range of lamb and sheep categories with all but Merino lamb posting an increase.

East coast Restocker lambs staged a late rally jumping 30¢ yesterday to close the week up 9.7%, the best performer in the group. East coast Merino lamb the laggard, but only off 5¢ to register a 0.8% decline. A bit of a tussle between Victorian and NSW Merino prices this week, with Victorian Merino back above 600¢ after a 9.5% gain while NSW lost 4.3% to close at 582¢/kg cwt. In the West Trade Lambs the strongest category this week up 2.8% to 627¢, but still 10¢ shy of the ESTLI.

Figure 1 demonstrating that East coast lamb throughput has returned to more normal ranges, albeit it 27% above the seasonal average for this time in the year with just over 173,000 head yarded. A similar pattern displayed this week by East coast sheep with yarding levels sitting 20% above the seasonal average, but also within the 70% range, with around 70,000 head changing hands at the sale yard.

East coast lamb slaughter showing no signs of capacity issued despite the TFI disaster at Murray Bridge. SA lamb slaughter trekking well below average for this time of the season and sitting 38% under the seasonal average, understandably. However, some of the supply being taken up by Victorian and NSW meat works with the total East coast lamb slaughter running just 16% under the seasonal average – figure 2.

What does it mean/next week?:

A mixed bag for forecast rainfall into next week with the Western sheep rearing regions getting some good falls but most of the South-east missing out. However, BOM modelling for February shows a good chance of above average rain over the whole month for the South East and a very high change for continued rain in the West which is likely to provide further pricing support into the coming few weeks.

The wool market took a bit of a hit this week with most categories losing ground, with the exception of the very fine end. Cardings were hit particularly hard with the combined average fall for all three centres coming off nearly 200¢.

The higher A$ saw the falls in US $ terms lessened, but the benchmark Eastern Market Indicator (EMI) ended the week off 57¢ to close at 1744¢. The Western Market Indicator (WMI) mirrored the Eastern falls to register a 39¢ decline to 1821¢ – figure 1.

The Southern Carding indicator the worst performer of the three centres off a whopping 230¢ to see it move back under 1300¢. Northern and Western Cardings off 179¢ (1334¢) and 184¢ (1319¢), respectively.

17 micron and finer managed slight gains between 5-15¢ but most of the medium to coarse categories posted losses of a 20-70¢ magnitude. Reports from the auction floor stated that buyers were happy to pay for better prepared, quality lines but anything that was poorly prepared or suspect in quality was reasonably discounted, with buyers showing a willingness to step aside.

Growers reluctant to chase the falling market lower saw the pass in rate lift to 14.3% with 36,430 bales sold from a total offer of 45,525 – figure 2.

The week ahead

Chinese mills likely to begin the wind down in activity as we head toward the New Year festivities there and may mean buyer interest continues to wane in the coming week. A rampaging A$ above 81US¢, thanks to Trumps comments over the weekend unlikely to provide a lifeline for wool prices this week.

Sales are scheduled for Wednesday and Thursday in all three centres with a total of 42,244 bales on offer.