Mecardo Strength to strength for wool

The wool market had a good week, as buyers stepped in to a large offering bidding spiritedly. It seems that efforts to refill the wool pipeline and build stocks in anticipation of growing downstream demand is the motivating factor for a stronger wool market. The market now is at better-than-expected levels, as when in the August 2020 low caused by the global chaos as a result of COVID-19, this level of price improvement seemed unlikely.

The Eastern Market Indicator lifted 43¢ or 3.4% for the week, to close at 1318¢. To put the market in perspective, the 17 MPG has lifted 804 cents or 60%, while the 19 MPG is up 641 cents or 64% from its low point in September last year, and the 21 MPG is 449 cents or 52% higher.

While all types posted improvements; with Cardings the only laggard, it was the 18 to 21 MPG’s that pushed the market this week, a change from recent weeks where the finer types have been the driver. These medium merino types posted lifts of 62 to 111 cents spread across all selling centres.

The AUD was stronger over the week lifting 0.3% to US$0.775 which saw the EMI in US$ terms finish 37 cents or 3.7% stronger at 1022¢. This places the EMI in US$ terms just 3% behind year ago levels. The last time this indicator was above 1,000 cents was in March last year.

Fremantle with a merino dominant catalogue again performed better than the east posting a 58¢ gain, settling at 1372¢. In US$ terms the WMI was 48 cents stronger for the week, a 4.8% lift.

While not picking up all of last week’s losses, AWEX reported that Crossbred types were stronger following the lead from the merino section. 26 MPG lifted 41 cents, while the 30 MPG improved 32 cents in Melbourne.

Cardings were cheaper in all centres, they were 9 cents lower in Fremantle, while Sydney was down 23 and Melbourne back 20 cents.

Again, we saw a solid clearance of bales to the trade this week. AWEX reported that 46,049 bales were offered this week, 5.7% withdrawn and 9.7% passed-in, resulting in 41,580 bales sold. This is well above the average clearance season to date of 31,281 bales. It is a sign of improving demand that for the first six months of this selling season 28,000 bales per week were purchased by the trade, however for the sales conducted in 2021 the average clearance has been 41,800 per week.

This week the strength of the auction market spilled over into the forward market, with 19 & 21 MPG contracts on the Riemann platform out as far as October 2021 trading at levels at or above the spot auction prices. While this is a positive indicator of the outlook for wool demand for the rest of 2021, it is also an opportunity for wool producers to reduce their price risk for future clips.

The week ahead….

The strong market has again encouraged another big offering of 52,614 bales for next week, with Melbourne selling Tuesday, Wednesday & Thursday, and Sydney & Fremantle selling over two days. There may be some reaction to the strong upward move this week at next week’s sales, however underlying demand and forward market price levels suggests another good selling week ahead.