Tag: Wool

No need for Rekindling, wool market is on fire

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.

It’s a great time to be a wool producer

With one of the larger offerings for this year the market performed very strongly this week. Every category posted gains. Records were set with the 19.5 MPG posting its highest level since its 2001 listing, and cardings topping 1300 cents in Melbourne, a record against our records going back to 2002.

The Eastern Market Indicator (EMI) rose 45¢ on the week to 1,623¢ with AWEX reporting this a new record high in Australian dollar terms. The Australian dollar was unchanged on the week, with the EMI in US$ terms posting a rise also of 35¢ to end the week at 1,252¢. The EMI in US$ terms is edging however it is still well off its previous record of 1504 cents set in July 2011.

Only 2.2% of the offered bales were passed-in, resulting 45,193 bales cleared to the trade. Again, this is a strong signal of the strength of the current market.

Whether these prices are a result of AWI market initiatives, or a response to reduced supply, or maybe just a normal improvement in the demand cycle, growers who have wool to sell now are receiving “best ever” wool cheques.

The rally also carried across to the inferior types; as is usual in a strong rally, wool carrying higher mid-breaks, or lower tensile strength, or greater VM got carried along by the surging market.

We are now at levels where predictions of future price directions become a bit of a guessing game. Will buyers (more importantly their customer processors overseas) pull back from this rally and we see the market retrace, or is this rally unstoppable and further increases are imminent?

Either way, wool growers should continue to sell as soon as wool is tested, and also take a close scrutiny of forward price bids to look for cover for some production for future clips.

The week ahead

42,722 bales are rostered for sale next week across the three selling centres (Figure 3). The roster lists 44,000 and 40,000 for the following weeks; based on current demand this should pose little challenge for the market to absorb.

A Quick Billion Dollars

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.

Fine fibres intimidating the rest of the market

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.

Wool market keeps on improving

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.

The Eastern Market Indicator for the week lifted another 16 cents to close at 1,566 cents in A$ terms, while in US$ terms it rose 11 cents to 1,224.  The market in the west also improved, gaining 13 cents to close at 1621 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%.

Crossbred wool again was unable to follow the lead of the Merino section, losing ground across the board, with the only exception being the limited 32 MPG offering which held steady.

A note from AWEX this week points out that the poorly prepared X Bred clips were the most affected and struggled to attract competition. This is a salient reminder, when demand weakens the focus of buyers shifts to the better lots; in a strong market, the case is often that poorer lots are well supported as buyer’s scramble for supply.

It was also observed that the Skirtings market is feeling the effects of a strong Merino fleece wool market with most types improving 20 to 40 cents for the week.

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 normal seasonal increase in high Mid Break lots coming forward, as reported by Mecardo this week.

Cardings are also tracking along nicely, and while yet to reach the 1200 cent peak of May, they are well entrenched above 1,100 cents, mainly due to the limited supply.

The week ahead

A total of 46,512 bales are listed for sale next week across the three selling centres over 2 days. This is consistent for the next three weeks roster with around 40,000 predicted each week to be offered.

As stated last week, “the surge in the market is enticing, and again shows the resilience of the wool market now”. 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.

 

A contrarian wool market

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.

The Eastern Market Indicator for the week lifted 28 cents to close at 1,550 cents in A$ terms, while in US$ terms it rose 23 cents to 1,214.  The market in the west also had a strong positive lift, improving 38 cents to close at 1570 cents.

Crossbred wool bucked the trend with a disappointing week where falls of 10 to 20 cents were evident.

For the calendar year, the EMI has averaged in A$ 1506 cents, and in US$ 1153, so the current market good be referenced as a “Spring rally”.

As has been regularly reported by AWEX, wool with good specifications is attracting strong competition, and at times significant premiums, however when the market surges like it has this week the lesser quality wool also benefits. This was the case this week. The general MPG indicators in the Merino types all showed improvements of 20 – 60 cents, with only the limited superfine offering in Melbourne the exception.

This reinforces the case for active marketing of all types, but especially those types that exhibit faults or have lesser additional measurements. In this environment of tight supply, the risk of holding lines of wool that don’t meet the broker price expectation (passing-in lots) are not as great as usual; that is, reserving some of the lots offered for auction is an even sounder strategy than normal with the current market situation.

Last week Mecardo reported that the usual season pattern for the wool market in the Spring is negative, and the current move contrary to the norm. Does this reflect a new order for the wool market caused by tight supply, or is the market likely to revert and mirror previous seasons?

Whatever the future, one other point needs to be made regarding these sudden market moves. The best time to get the forward prices is always on an auction rally. This is most effectively achieved by having the wool broker place Good Till Cancelled (GTC) orders in the forward market for a portion of the future clip.

A total of 38,217 bales were cleared to the trade this week, with the pass-in rate of 3.6% was well below the season average of 7.6%.

The week ahead

A total of 9,716 bales are listed for sale next week across the three selling centres over 2 days. This is consistent for the next three weeks roster with around 40,000 predicted each week to be offered.

The surge in the market is enticing, and again shows the resilience of the wool market at this time. Again, barring and currency appreciation next week will again be a good week to be offering wool.

Market influences

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?

The Eastern Market Indicator for the week slipped 3 cents to close at 1,522 cents in A$ terms, while in US$ terms it fell 30 cents to 1,190.  The market in the west moved only marginally also, losing 2 cents to close at 1570 cents.

A key point of interest in the wool market is the fine wool price, including the fine wool price relative to medium wool.

Currently, the 18 MPG is sitting comfortably above the 2,000-cent mark, and the 21 MPG is above 1500 cents at 1524. In fact, the 18 MPG is settled closer to 2,100 (currently 2,078 in Melbourne) having briefly bobbed above 2,200 earlier this year while the 21 MPG poked its nose above 1,600 last month.

For the 18 MPG, this rally first broached 2,000 cents in March this year, while the 21 MPG found the 1,500-cent benchmark earlier in July last year.

It has been a long wait for the 18 MPG since the last 2,000 cent level was touched; we need to go back to June of 2011 which marked the beginning of a long period of sub-2,000 cent 18 MPG indicator levels.

On the other hand, while the 21 MPG also had a good period in 2011, it managed to first break the 1,500 cents level this rally in July last year.

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.

It’s been a long wait though, while a 400-cent premium showed up in January this year, fine wool producers last received a greater than 400 cent premium over the 21 MPG in September 2011.

A total of 39,657 bales were cleared to the trade this week, with the pass-in rate of 8.2% only slightly higher than last week’s 6.9%. (Figure 3).

In regards to the Melbourne fine wool market performance, this was affected by an increasing prevalence of wool exhibiting higher mid breaks. To emphasise, AWEX report that wool with less than 20% mid breaks found increased competition and greater premiums.

The week ahead

A total of 40,587 bales are listed for sale next week across the three selling centres. This is consistent for the next three weeks roster with around 40,000 predicted each week to be offered.

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!!!)

Steady as she goes for wool

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.

The Eastern Market Indicator for the week remained unchanged at 1,525 cents in A$ terms, while in US$’s it fell 1 cent to 1,220 (Figure 1).  Not to be outdone, the market in the west followed a similar path, rising 2 cents to close at 1572 cents.

The skirtings market was by comparison erratic; gains on the first day of 10 to 20 cents were given back on the second day of selling to see this sector unchanged on last week.

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).

In regards to the Melbourne fine wool market performance, this was affected by an increasing prevalence of wool exhibiting higher mid breaks. To emphasise, AWEX report that wool with less than 20% mid breaks found increased competition and greater premiums.

The week ahead

A total of 41,483 bales are listed for sale next week across the three selling centres. This is consistent for the next three weeks as the early spring shearing rolls into stores.

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!

Spring in the wool markets step

The wool market has been rather playful of late, appearing to have a spring in its step with a few giddying price highs and corrections. This week’s market was no exception with large movements in red across the board.

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.

The finer fibres of less than 19 micron posted the largest losses for the week. Given that they had been holding ground in comparison to the rest of the market recently, it was only a matter of time before widespread corrections occurred in this category. Losses ranged from 30 to 60 cents and were highest in 18 -19 micron wools.

A total of 42,764 bales were offered for sale this week. However, growers were reluctant to accept any retraction in price, passing in a significant 15.5%. Word from the floor suggested that there was interest from exporters chasing any of the passed in lots after sale hours (Figure 3).

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 week ahead

A total of 43,077 bales are listed for sale next week across the three selling centres. As long as we don’t see any significant global actions affecting the currency and trades, the hinted demand from exporters raises our hopes for a favourable week.

Mirror, mirror on the wall, fine wool and Fremantle take a fall

In a week of “smoke & mirrors”, the market reflected a similar image to last week and absorbed a large offering of wool in all centres with 39,000 bales cleared. It was the finer than 19 MPG this week that disappointed with all other categories posting gains.

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.

Merino skirtings started slowly but picked up over the week to finish strongly; it was a similar story for X Bred types while Cardings, including lambs, locks and crutchings, were solid early and stronger by the week’s end.

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%.

In fact, AWEX reported that on Wednesday Melbourne offered the largest merino fleece offering in almost 12 months.

Fremantle struggled on Thursday, with across the board price reductions predominately in the19.5 to 22.5 micron offering, although growers only passed in 5% indicating satisfaction with the market levels.

In the Forward Market, the past couple of weeks have seen growers take up good forward prices out as far as February 2018. This would seem a reasonable approach given the strong current market and the somewhat uncertain global circumstances.

The week ahead

 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.