Tag: Wool

And the wool market marches on.

Posted on by Caitlin Dearden

The wool market set another record this week, it is looking settled at these previously un-attained price levels. Probably another record was set when wool producers in the Sydney catalogue sold 99.9% of bales offered in the first day. Growers are enjoying this market!

After last week clearing 40,000 bales, this week only 35556 bales were cleared to the trade, from a total offering of 36398 bales. The impact on the market was significant, with the Eastern Market Indicator (EMI) lifting by 21 cents on the first selling day and a further 31 cents on Thursday to see it close for the week at 1943 cents, while in US$ terms the EMI found an additional 49 cents to settle at 1462 cents (Figure 1).

The AU$ was slightly stronger to settle at $0.75, while the Western Market Indicator (WMI) gained 62-cents to 2080 cents.

Many of the MPG’s only started in 2011, so comparisons of the market are often made from this date. Currently, all indicators 28MPG and finer are at their record high levels since 2011. This is a remark able market.

Merino skirtings posted improved levels each day and closed the week on a very solid note.

Merino Cardings had another good week, all centres showing stronger prices with an average lift of 22 cents.

The week ahead

Next week fewer than 32,000 bales are offered, a decrease on this week’s sales.

The large clearance in the first week after Easter provided an insight into the current demand and this has certainly carried through in subsequent weeks. It must be keeping exporters awake, will the make continue to rise, consolidate at current levels or retreat after consecutive increases.

All systems go for the wool market

Posted on by Caitlin Dearden

The wool market bounced out of the blocks this week, from outset the buyers were forced to compete vigorously to secure any volume. A weaker Au$ assisted but there was no denying the urgency of the buyers as they bid up.

The Fremantle market got a mention last week, and the positive sentiment it left on the previous weeks market certainly carried through to the open of this week.

With a smaller offering compared to last week of 42,794 bales, the Eastern Market Indicator (EMI) gained 55 cents to 1891 cents, while in US$ terms the EMI was up 33 cents over the week to settle at 1414 cents (Figure 1). In the Fremantle sales, the Western Market Indicator (WMI) rallied 45 cents on the opening day and a further 21 cents on Thursday to end the week at 2018 cents. This easily surpassed the previous record of 1965 cents.

The AU$ was softer, trading around the US$0.748 mark, slipping below the US$0.75 cent support mark.

In line with the stronger market in general, the pass in rate fell to 2.3%. Growers and brokers stepped up and delivered to a strong market resulting in 37,842 bales eventually sold, with only 886 bales passed-in.

Crossbreds also posted gains although more restrained than the rest of the market, while the cardings also felt the increase in the general market and lifted.

Skirtings were reported extreme for selected lots, with reports of 40 to 50 rises at the open which carried through the week.

With just over 36,956 bales sold this week, (season’s average 41,541) we expect supply will continue to be front and centre in buyer’s minds. There are 37,496 bales rostered for next week, however the roster falls to an average of 34,793 bales for the following weeks.

The week ahead

The demand looks solid, supply is tight and getting tighter and the currency looks like it wants to help also. This all points to a positive short-term outlook for wool.

We can only repeat last week’s outlook, this is a good time to be selling wool and it looks like the market still wants to improve.

Was it turn-around week?

Posted on by Caitlin Dearden

The wool market opened the week with a continuation of the softer trend of last week, but on Thursday demand returned, and the market looked to have a completely different tone.

This was best reflected by activity on the Fremantle auction floor; the close of last week in Fremantle was definitely “bearish”, while this week it acted like the “bull”, closing strongly.

We take more notice of the Fremantle market when forming a view of next week’s market, with its 2-hour time difference a strong finish is positive for next week, while a weak finish doesn’t provide a lot of confidence going forward.

With a similar offering to last week of 42,794 bales, the Eastern Market Indicator (EMI) lost 10 cents to 1836 cents, while in US$ terms the EMI gave up 17 cents over the week to settle at 1381 cents (Figure 1). In the Fremantle sales, the Western Market Indicator (WMI) slipped 10 cents on the opening day before fully recovering on Thursday to end the week up 3 cents to 1952 cents.

The AU$ held steady around the US$0.75 mark, after slipping below the US$0.76 cent mark last week.

In line with the slightly softer market in general, the pass in rate lifted to 5.3%. The varied pass-in rate makes interesting viewing; in Sydney it was 3.2%, Melbourne 5.3% while in Fremantle, despite the stronger market, growers were prepared to pass-in 8.2% resulting in 40,500 bales eventually sold.

On the back of last week’s currency induced rally that provided wool sellers with new high’s, this week’s market can be taken as a positive with little resistance to the market levels despite the Wednesday easier market.

AWEX reports that buyers are finding it difficult to “average” their purchases with the increasing percentage of lower yielding and poorer style wools offered. Of course, this is making more attractive any lots that are of good style and yield. Again, these types were reported as attracting strong competition.

There was an interesting comment in the AWEX Sydney report on Wednesday; “19 microns and finer had good support for the Non-Mules and Pain relief lots”, perhaps reflecting specific demand for these wools. For some time, we have been interested in detecting any premium for non-mulesed or pain relief identified lots; this is a rare comment from AWEX that it was noticeable in the auction.

Crossbreds retreated after five weeks of positive gains, while the cardings were generally unchanged except for W.A. where the correction was a re-alignment with Eastern markets.

Skirtings were reported as steady for the week, although again the AWEX report contained a proviso that lots with less than 3% VM were keenly sought.

With just over 40,000 bales sold this week, (seasons average 41,868) we expect it will be difficult to retrieve sales above this level until the Spring. There are 38,200 bales rostered for next week, however the roster falls to an average of 35,000 bales for the following weeks. With the average clearance since January of almost 42,000 bales, the seasonal average can’t help but fall in coming weeks.

The week ahead

The market had a go at correcting the strong recent weeks, but by week’s end it was back to business as usual.

This along with tightening supply (38,000 rostered for next week) bodes well for the immediate future of wool prices in general.

Buyers bid up for best style.

Posted on by Caitlin Dearden

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.

New Year market continues positively

Posted on by Caitlin Dearden

The break in wool sales over the Christmas period proved positive with the opening sale of 2018 pushing higher across all Merino and fine X Bred types.

Buyers were able to secure new orders over the Christmas break, and also digest the potential of reduced supply in coming months.

Of concern to exporters was year on year tested volumes as reported by AWTA showing December Merino volume was down 20% compared to 2017.

This pushed the EMI to a new high of 1818 cents, adding 58 cents for the week on top of the 405-cent gain in 2017.

Despite the Au$ improving US$0.02 over the break, the EMI jumped 82 US cents for the week underpinning the strong market sentiment. W.A. didn’t miss out either with the WMI lifting 72 cents, closing the week at 1888 cents.

If there is one potential concern on the horizon it is the relationship of wool prices to competitive fibres. Traditionally a 3 : 1 ratio to the cotton price was seen as comfortable. This ratio today is closer to 8 : 1 although as Mecardo reported this week the ground rules have changed. The price ratio is closely related to supply, and with supply unlikely to increase any time soon this risk is minimal.

It was noted that while the high ratio can be supported based on supply of wool as a percentage of cotton production, volatility is still possible. This should encourage wool producers to continue to sell asap, and to consider hedging future clips at record income levels.

In 2017 Cardings “outperformed”, posting a 32% gain for the year to end at almost 1500 cents, however this was no barrier to further increases this week 60 – 75 cent increases achieved.

As we have previously reported, broker’s stores have record low grower stocks, and with growers clearing out wool sheds to get wool into sales to capitalise on the record prices, the supply side has little ability to respond with increased bales to meet demand.

The week ahead

The market heads into 2018 with confidence, reduced supply and increased demand appear to be the underpinning sentiments which bodes well for sellers.

Next week 54,250 bales will be offered in the three selling centres..

Buyers enter the Christmas spirit

Posted on by Caitlin Dearden

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 8th 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.

A joyous wool market to all

Posted on by Caitlin Dearden

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.

An early shear bring pre Christmas cheer

Posted on by Caitlin Dearden

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.

What goes up, must come down

Posted on by Caitlin Dearden

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.

Another record for wool.

Posted on by Caitlin Dearden

AWEX identified an interesting statistic this week; the turnover of wool sold this week of $96 million was the largest since 2002. The kicker is that while this week it was generated by the sale of 49,000 bales, in 2002 it was on the back of an offering of 74,500 bales. So, a similar $ value heading back to rural Australia but 33% less bales produced.

It was a steadier week with the Eastern Market Indicator (EMI) finished the week at 1,683¢, gaining 2 cents and 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 losing 13¢ to end the week at 1,279¢.

Again, a small pass-in rate this week of only 3.2% of the offered bales, resulting in 49,009 bales cleared to the trade. This is one of the largest weekly sale volumes for this selling season, with only the first week after the winter recess larger. Fig 3.

Some of the recent “heat” dissipated from the market this week with reports of “mixed results” where quality again was a factor; or more accurately lower quality wool at times struggled. This has been a pattern for the year however in recent weeks when the market rallied lower grades were supported.

Crossbred wool fell sharply losing as much as 50 cents reflecting the volatile nature of this sector. In contrast, Cardings continue to improve and set new records with all centres showing strong lifts across the week.

We have commented previously that the current market conditions are unique in our time of observation. Supply is moving through the system quickly; that is there are little stocks held either on farm, in broker stores or in mills. Sheep farmers are experiencing record income inflows; with not only wool prices good but so too are sheep and lamb prices. This will mean that any retracement in price in the future will be met with “cashed up” wool producers holding back wool from the market and reducing supply to processors.

As we said, these are unique times where it could be argued that the producer is able to influence the market by withholding supply. The qualifier is that any supply “squeeze” may have short term market influence but it is unlikely to be a long term positive factor on price. In the end, customers will adjust orders to meet supply and pay a price that works for their customers at retail level.

The question of “when or if” the market reaches a top is coming to mind now, we know markets don’t rally forever and that they don’t track sideways for long either. Mecardo had a look this week in the article What is the risk in the wool market at present

The week ahead

The big offering this week is to be followed by another 48,700 bales rostered for sale next week across the three selling centres (Figure 3). The roster then lists 44,000 for the following two weeks. Of note is the strong report from Fremantle this week, generally a solid market on Thursday in W.A. with the 3-hour time delay to the East Coast is a good lead for next week.