Pricing stalls as market awaits more news from China

Shorn wool in heap in shearing shed

The spark was lit a fortnight ago, but the wool market’s fuse has stalled this week. The previous news from China was a firework for the market but the crowd now patiently awaits the big bang.

Auction buyers were more selective with bidding this week as they chased lots with better yields according to AWEX.  This resulted in a mixed bag of price changes across the board and an increase in the pass-in rate to 8.3%.  The Eastern Market Indicator eased just 1¢ to 1138¢/kg.

 

First, the market was waiting for signs out of China that the tide was turning in the economy, now it appears that wool buyers don’t want to take another leap forward until more proof is in the pudding. Whilst auctions were underway, the size of economic stimulus from China to support lower-income citizens and local governments hadn’t been confirmed.

 

After auctions had finished, the announcement from the Housing Ministry of a roughly 562 billion housing plan was more conservative than expected. The Chinese housing market is beginning its journey to recovery, but for now, it’s the tortoise as opposed to the hare and the wool market may follow suit.  

 

With the exception of 19MPG wool, all merino price categories finished lower in Sydney this week, with the finer end of the spectrum experiencing the steeper declines. 17MPG lost 30¢ to 1692¢/kg. In the south, indicator prices ranged from 11¢ declines to 7¢ gains.  In Fremantle, all indicators eased with 21MPG losing 9¢ to 1281¢/kg and other finer merino categories ranging 15 – 16¢ lower for the week. Merino cardings increased 9¢ to 731¢ and the pass-in rate averaged 8.5% out west.

 

Crossbred wool in Northern and Southern markets saw modest price gains, with 28MPG increasing 5¢ to 388¢ at the Auction in Melbourne.

 

This week Andrew Woods took a deep dive into sheep genetic trends to have a look at what direction the merino fibre diameter is heading (read more here). The Western Australian merino clip is experiencing a record low fibre diameter, the fall in the eastern merino average merino micron has slowed markedly. Fibre diameter arguably trending higher or staying stable at best means that the commercial clip moving forward might see little growth in superfine wool (outside of seasonal fluctuations based on rainfall). 

Next week

Next week’s national offering is expected to sit at 36,553 bales, a decline of 11% week on week.

It will be a good test to see if the momentum holds at lower supply levels or if the sugar hit has worn off. Chinese economic news was good but not great, will this dictate bidding next week?

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Click on graph to expand

Click on graph to expand

Data sources: Nutrien Ag Solutions, AWEX, ICS, Reuters, Westpac, Mecardo

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