Sheep,In,Farm,Yard

Crossbred prices improved this week, but the Merino market opened to a softer tone and a lower proportion of low VM wool. The upcoming super fine wool sale next week could serve as an opportunity to assess underlying demand.

With no Fremantle sale this week, the brunt of the downward market trend was handed to Sydney and Melbourne.  The Eastern Market Indicator (EMI) fell 36ȼ this week to 1127ȼ/kg.  The exchange rate continues to depreciate, with the EMI in US$ dropping 25ȼ to 726 USȼ/kg.  If the exchange rate continues in the current range and the downward wool pricing trend persists, Australian wool will continue to become more affordable.  

In Sydney, a slow start set the tone for the week and bidding struggled to reach reserves as the pass-in rate for the week averaged 17%. The weakening trend hit the finer end of the spectrum hardest. The  17 MPG took the wooden spoon losing 107ȼ to sit at 1765ȼ/kg, and 18MPG lost 67ȼ to 1515 ȼ/kg.

To the South, whilst losses at the finer end were not as steep, the outcome for the week was much the same.  17MPG fell 57 ȼ to 1798 ȼ/kg and 18MPG dropped 29ȼ to 1548 ȼ/kg.  The pass-in rate in Melbourne averaged 13.9%. The weaker market was driven by strong discounts for higher Vegetable Matter (VM) lots, which typified market activity for much of May-June this season. This week’s offering (nationally) saw the proportion of Merino fleece with < 1.0% VM drop to 37.5%.

In what has been a welcome sight, crossbred wool continued to improve. 28MPG in Sydney improved 10 ȼ to 340 ȼ/kg and 32MPG in Melbourne jumped 13 ȼ to 263 ȼ/kg.  Cardings in Sydney lost 4 ȼ to finish at 730 ȼ/kg and Melbourne cardings dropped 9ȼ to 695ȼ/kg.

A smaller total offering was expected with the west on break. 38 774 bales were offered on the East Coast this week.  32 857 bales were sold with softening demand reflected in the highest past in rate for the 23/24 season to date, at 15.3%.This week on Mecardo, Andrew Woods continues to investigate the supply dynamics of competitors in the global wool market, with this week’s focus on the Argentina wool clip (read here).

Next week

In Sydney, there is a designated superfine sale next week which will provide a telling insight into underlying demand for premium wool.  With exchange rates creating an opportunity for the supply chain/ processers to acquire cheaper product, their bidding behaviour will indicate if there is some confidence in end-use markets ahead of the Northern Hemisphere winter.

48K bales are scheduled next week as all three centres will sell on Tuesday and Wednesday.

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Data sources: AWEX, AWI, Refinitiv, Mecardo

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