Carmen-Lee Campbell - NSW - SHEEP

Supply and demand worked in the favour of buyers in this week’s market, as a larger offering allowed prices to slip to the lowest level since November.

The Eastern Market Indicator (EMI) lost 15¢ over the week, with most of the damage occurring on the opening day of sales. The EMI settled at 1152¢/kg, which is 13% lower year-on-year. Noteworthy swings in the AUD came into effect. The AUD hit 0.65 USD on Tuesday following the RBA’s unchanged policy rate and weakness in iron ore but recovered to 0.66 USD on Wednesday after the headlines revealed an unexpectedly low Australian unemployment rate of 3.7%.  

Sydney came under the most pressure, with 16.5 to 19MPG each losing anywhere from 38 to 52¢ weekly. Medium fibres experienced more tepid losses, with the 19.5MPG down 23¢ over the week.

Prices in Melbourne also eased, but to a lesser extent, and ended up in line with values in Sydney.

In the West, the market indicator dropped 9 cents over the week to 1289 ¢/kg. However, there was a change of direction after the falls on Tuesday, with all MPGs rising by 3 to 15 cents in Fremantle on Wednesday. According to AWI, the strongest prices of the day were achieved at the end, setting positive momentum for the following week.

Merino carding prices were the only positive for the week, lifting 12¢ in Melbourne and Fremantle and 4¢ in Sydney. A total of 44,033 bales were offered up to the trade, and after a pass-in rate of 8.7%, 40,027 bales were sold. This represents an additional 2,559 bales sold compared to the previous week.

While the wool market has seen relatively low volatility compared to livestock prices in the past year, an interesting question was posed on which microns experience the most price volatility. We found that in proportional terms, price volatility increases as fibre diameter decreases (read here). This insight may be useful in determining a price risk management strategy, although it is unlikely to impact enterprise decisions significantly. 

Next week

A large offering is expected next week ahead of the easter recess. 49,814 bales are expected, which would be an extra ~ 5,000 bales compared to this week’s offering. These volumes are likely to pressure the market.

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Data sources: AWEX, AWI, Mecardo

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