Carmen-Lee Campbell - NSW - SHEEP

It has been a fortunate fortnight for the Merino wool industry as market indicators and pricing continue to improve. Demand has been resilient in the face of increased, unseasonal supply.

The Eastern Market Indicator (EMI) increased 19ȼ to 1170ȼ/kg and similarly in US dollar terms improved 19ȼ to US 767ȼ/kg. This was driven by improved demand in merino wool categories. The Western Market Indicator improved 22ȼ to 1316ȼ/kg.  Best on ground this week was 17MPG in Sydney which jumped 59ȼ and despite improving the least, 19.5 MPG in Melbourne was still up 18 ȼ for the week to 1399 ȼ/kg.

The EMI is now just 7% lower year-on-year and likely would have been higher this week if it wasn’t being dragged down by cheaper crossbred wool. This week Melbourne 26MPG lost 26 ȼ to 546 ȼ/kg.

Supply for the 2023/24 season has been ahead of schedule, with this season’s national offering so far surpassing 750,000 bales, which is about 8% higher year-on-year.  This sale week in particular, saw an unseasonably high 43,638 bales offered which was 37% higher than the same sale week last season. 

Anecdotally it has been reported that shearing has been ahead of schedule this season, and this makes sense when we look at the volume of stock heading to slaughter.  The arrival of bales to auction is also a side-effect of the diminished lamb and mutton market as producers incentivise cash flow. Bucking the overlying trend of many other commodity markets in Australia this year, this relatively higher supply of wool has arrived in the market when demand is also relatively stronger.

Despite a 10% increase week-on-week in offered wool, all Merino categories saw double-digit improvements in all selling centres.  The exchange rate appreciation and reduced supply of low (<1%) vm wool can be added to the list of potential downward demand pressures that seemed to be ignored by buyers this week.  Evidently, sellers did not want to look this gift horse in the mouth, as pass-in rates fell again to reach its second-lowest mark for the season thus far at 4.8%.  

Next week

There are always a few big sales before the Christmas break as the global supply chain ensures they have stock on hand. Have these sales come early this year as a response to the Aussie dollar creeping upward? Or is this demand spike an indication of movement on the consumer demand front as we approach Northern Hemisphere winter and the retail silly season in developed economies?

Next week’s offering is scheduled for 49K bales, which would be the biggest we’ve seen since April and another test of the market’s appetite.

Click on graph to expand

Click on graph to expand

Click on graph to expand

Data sources: AWEX, AWI, Mecardo

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