Erratic was the word used by AWEX to describe the wool market this week. In a mirror image of last week, the market opened weaker on the back of increased volume. Selling on the first day this week was met with a 15% pass-in rate and encouraged grower withdrawals of wool, which then contributed to a reversal back to where the market began on the final day.

The Eastern Market Indicator (EMI) for the week improved by just 1¢ to close this week at 1189¢, however the fall of 33 cents on the opening day left sellers disappointed while a reduced offering on Wednesday saw all of this fall recovered. The AUD was stronger at US$0.73 which saw the EMI in USD terms finish 16 cents or 1.8% higher at 869¢. Fremantle had a positive 24¢ or 2% rise for the week and now sits at 1241¢. This was impacted by a withdrawal of 29% of the fleece offering in WA resulting in the remaining wool attracting good support with minimal movements across the MPG range. This carried over to the final day with the positive effect spilling over to Melbourne & Sydney as well.

The results were mixed with Sydney & Fremantle for the week posting positive gains for all Merino MPG’s, while Melbourne’s improvement was limited to the 17, 19 & 21 MPG categories.

Crossbred types were generally cheaper except for 32 MPG which posted a 15-cent lift in Melbourne.

Cardings rose in Melbourne by 7 cents but gave up 33 & 27 cents in Sydney & Fremantle respectively.

A much larger offering to last week of 37,512 bales came forward, with 33,180 bales sold, almost 3,000 more than last week with a pass-in rate of 11.5% nationally.  Of interest was on day one of the selling week, across the three selling centres 15% of the offering was passed in, with Sydney the highest passing 16.5% of bales offered.

This week on Mecardo we looked at the relationship between auction volumes and price movements. When demand suffers a contraction (as it did in mid-2019 and again this autumn due to COVID-19) the volume of wool sold falls sharply, steadying and recovering as confidence returns to the market which trades at a new, lower price level. This appears to be happening again.

Key take away points were that weekly sales volumes have picked up since the April to June 2020 period. Sales volumes in September/October in 2020 were on par with the same period in 2019, however, since May there has been no discernible relationship between weekly changes in offer volumes and the average merino price.

The week ahead….

A larger offering of 43,539 bales is rostered for next week with all centres selling on both Tuesday & Wednesday.

Again, volume of this magnitude will test buyer capacity, however recent seller strategy of withdrawing lots may remove some supply pressure on the market.

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Click on graph to expand

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Data sources: AWEX, Mecardo

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