Cheaper Tuesday halts market gains

Sheep

The Sydney pass in rate for the week averaged 2.1% in an indication that buyer demand is strong at this level of supply and sellers are happy to part ways at the current market pricing.

With the southern market enjoying the public holiday break,demand was strong in Sydney on Monday, with the broader categories achieving 20ȼ plus gains for the day.  Tuesday saw a softer market, chipping away at the gains from the previous days. Even still, Sydney ended the week in a stronger market than it began the week; 18.5mpg improved 13 ȼ to 1509 ȼ/kg and 20mpg rose 6 ȼ to 1365ȼ. 

The Melbourne market did not improve this week which has contributed to the overall decline in the Eastern Market Indicator, which lost 5ȼ to 1167ȼ/kg.  Similarly, the Western Market Indicator finished 10ȼ lower to 1298ȼ/kg.

Per AWEX market commentary “Over the seventy selling days that have since transpired [from the start of the selling season}, the EMI has risen on twenty-nine occasions, fallen on thirty-five and been unchanged on the other six”.  We know that at specific micron levels that the premiums of finer wool have declined but overall market sentiment is the very definition of drifting along. Considering the increase in weekly sales volumes (on average) the resilience of the wool market at this moment is very reassuring. Particularly when we consider the wider market wool operates in.

As investigated by Andrew Woods this week on Mecardo (read here),  Apparel fibres (including wool) continue to work their way through a cyclical downturn. The very nature of a cycle means that downturns are eventually superseded by cyclical upturns, when that happens apparel prices including wool will get a lift in demand and hence prices.   

Next week

The wool market will have more volume to work through next week, with the offering to reach 45K bales per AWEX estimates, this is typical of this time of year (See Figure 2).

In the absence of a demand driver in the global economy attention will shift to supply. After a few weeks of declining auction volumes, total supply to auction for the season is now tracking behind last seasons year to date total which helps. However, the level of supply at the micron level will be critical, fine wool supply has been elevated (relative to last season) and pricing has reflected that. /span>

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Data sources: AWEX, AWI, Mecardo

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