Tightrope walk getting shakier for Wool

Merino sheep

A smaller offering and reduced pass-in rates did little to halt the wool market’s downward trend. With current dynamics providing challenges for sellers and motivations amongst buyers difficult to gauge, a large offering approaching 47-49k bales next week will certainly be a daunting prospect as we approach season’s end.

This week, the downward momentum has continued for the Eastern Market Indicator (EMI) as a 35ȼ drop saw the EMI finish 3% lower at 1139ȼ/kg. When expressed in US dollars, the EMI sits at 774 USȼ/kg.  Over the last few weeks the cheaper trend for wool, especially in USD terms, hasn’t translated to demand support at this stage.  

28,484 bales were offered this week to market, relatively small in the context of the entire season (as Fremantle markets were in recess). However, the volume presented still tested the tenacity of the market as significant withdrawals were made pre-sale and the national pass-in rate of 14.8% still sits above this season’s average of 13.2%.  With 24,260 bales sold (a 21% drop from last week), it appears that the market might have had its fill of large sales volumes.

In Sydney and Melbourne, the Merino fleece categories were all “worse for wear” this week.  The finer end of the spectrum found the going toughest, as 17MPG in Sydney lost 101ȼ,  finishing at 1842ȼ/kg and 16.5MPG in Melbourne fell 122ȼ to 2010ȼ/kg.  20MPG in Sydney fell 21ȼ  to 1335ȼ/kg and dropped 41ȼ in Melbourne ending the week at 1341 ȼ/kg.

Cardings in Sydney sit at 741ȼ (up 2 ȼ) and 716 ȼ in Melbourne (down 8ȼ). Crossbred wool down south had a minimal offering and exhibited little change as 28MPG increased just 2ȼ to 315ȼ/kg.

This week on Mecardo, Andrew Woods investigates implications for Micron premiums and discounts as supply shifts finer (read here).  The likelihood of a drier spring points to a narrowing of relative prices between micron categories.

Next week

Next week’s sale offering looks to initially be in the range of 47k to 49k, around 20k bales more than this week.  With the market softening this week under significantly less supply pressure than expected next week, wool buyers’ intentions as we approach the end of the season will play a critical role in the fortunes of the market next week.

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Data sources: AWEX, AWI, Mecardo

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