Sheep

Confidence in the wool market has taken a hit this week with a tentative start escalating into another meaningful decline in the EMI. With all sale centres experiencing strong pre-sale withdrawal, higher pass-in rates, and a declining supply of ideal wool lots for buyers, wins were hard to come by as all Micron Price Guides ended the week worse off.

The Eastern Market Indicator (EMI) fell 49 ȼ to finish the week at 1214 ȼ/kg.  It’s the lowest level since January 2021.   The EMI expressed in US$ sits at 801 USȼ/kg.

Buyers found the going tough to locate ideal spec lots as finer wool with low VM was difficult to source.  In Southern markets, finer micron price guides hit triple-digit ȼ losses on the week. 17MPG lost 117ȼ to 2063 ȼ/kg, and 16.5MPG dropped 106 ȼ to 2262 ȼ/kg.  Broader categories in this market were not immune from the softening market as 20MPG fell 60 ȼ to 1398 ȼ/kg.  In what has typically been a trait of Western markets this calendar year, sellers in Melbourne were more obliged to pass in lots as the market deteriorated, the pass-in rate reaching 24.7% this week in Melbourne.

Further North, market sentiment was similar as prices were driven lower as demand waned. 17 MPG dropped 92 ȼ to 2058 ȼ/kg and 19MPG ended the week 81 ȼ lower to 1515 ȼ/kg. Pass-in rates were lowest up North but still crept higher to 18.9 % for the week. 

In the West, sellers have been consistent in holding fast on the value of their wool.  Another significant level of withdrawal and pass-in of lots offered is evidence of this. Fremantle pass-in rates reached 47.8%, restricting the offering for buyers. However, this was not enough to drive demand as prices continued to decline.  18MPG was down 84 ȼ to 1692 ȼ/kg and 21MPG dropped 82 ȼ to 1311 ȼ/kg.

Crossbred markets did not experience the same level of decline as the finer end of the spectrum, but with prices still dragging at the bottom of the historical range, the room to drop isn’t as deep.  In Sydney, 28MPG dropped 25 ȼ to 310 ȼ/kg and 32 MPG in Melbourne was down 3 ȼto 235 ȼ/kg.

Cardings nationally were all worse off. The week ended at 739 ȼ in Sydney (down 35 ȼ), 761ȼ in Melbourne (down 25 ȼ), and 694ȼ in Fremantle (down 44ȼ). 

Sellers concerned with the direction of the market pulled lots to fight another day. The volumes cleared in the market declined significantly to 28 375 for the week, a 21% decline week on week and the lowest sum sold since November.  For the second time this month, pass-in rates were greater than 20% nationally, with this week’s pass-in rate reaching 27.3%. The last time we had a month with two weeks of >20% pass-in rates in the same month was August 2021. 

This week on Mecardo, Andrew Woods looked into RWS premiums for Merino Fleece this year (read here). In average or median terms premiums are being paid for RWS-accredited Merino wool (of reasonable quality).  The extent of the premium looks to be graded according to the quality of the lot.  

The week ahead….

Whilst the market earlier this year was buoyant with large volumes, the wave of wool looks to have bucked this trend as we approach the end of the financial year.  Whether this weakening market is the result of the large supply having a lower proportion of sought-after fleece, or buyer demand is waning will be investigated in the weeks to come.

The offering next week is currently scheduled to be 47 000 bales, but if this week’s performance and behaviour is an indicator much less will make it to the auction. All centres will be selling Tuesday and Wednesday.

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Data sources: AWEX, AWI, Nutrien Ag Solutions, Mecardo

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