In the second last sale for 2020, the wool market started strongly and continued apace over both selling days. The early indication of buyer interest on the forward markets was a precursor to a strong week of wool sales. Growers accepted the price rally and upped the clearance while reducing the pass-in rate to a 9-week low.

The Eastern Market Indicator kept climbing up and up this week, 26¢ on Tuesday and 28¢ on Wednesday, to eventually close this week 54 cents higher at 1198¢. The AUD was again firmer at US$0.774 which saw the EMI in USD terms finish 48 cents higher at 892¢. Fremantle also moved 46¢ higher settling at 1244¢.

It was mostly green across the board this week, Crossbred types no exception, with 32 MPG in Melbourne lifting the most, posting a 37-cent lift, a 15.2% gain on last week.

Cardings lifted by 32 in Melbourne, 25 in Sydney while Fremantle lost 2 cents.

It was in the finer 16.5 and 17 MPG categories in Melbourne where we saw the biggest movement for the week, finishing 142 and 114 cents higher respectively. There were increases in all types though, 18 to 21 MPG lifts ranged from 46 to 81 cents.

It was a higher offering and clearing this week than last, with 38,478 bales offered and 36,478 bales sold.

The pass-in rate collapsed to half of last weeks figure with only 5% not sold; this was the lowest pass-in percentage terms since mid-October earlier this year.  

This week on Mecardo, Andrew Woods looked at the building grower stock position (view article here). Wool stocks held by growers have picked up since mid-2018 in response to lower prices. While current stocks are likely in the range of 250-320,000 farm bales, if current trends continue, they are likely to end up close to 360,000 bales in mid-2021. This would put stocks at 22-23% of annual shorn wool production.

Given the strong cash flows enjoyed by many farmers in 2020, the consistent feedback is that farmers are happy to hold greasy wool stocks for some time. Considering the severe drop in demand out of Europe and North America this is a logical strategy. Stock levels expressed as a proportion of production remain well below the massive levels existing in the cotton industry. Given the low levels of stock reported along the supply chain, when demand does start to crank back up, a sizeable proportion of farmer held stocks will be required to re-stock the supply chain.

 

The week ahead….

With the end of year three-week recess coming up, a larger offering of 49,126 bales is rostered for next week, with all centres selling on both Tuesday & Wednesday.

Another performance like this week in the final sale for the year would provide optimism along the supply chain and increase the expectation of further price increases in the New Year.

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Click on graph to expand

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Data sources: AWEX, Mecardo

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