Withdrawals up as winter approaches

Mob of sheep moving in dusty yard

Wool markets opened to underwhelming demand across all centres as the trade approaches Winter and the end of the 2023/24 selling season. Although it is common for wool market volumes and prices to begin to decline, the drop was particularly steep for the finer end of the offering.

This week’s AWI market report detailed a lack of urgency amongst buyers who were present in the southern selling centre. AWEX noted that the Sydney market saw fewer buyers and a more selective strategy exhibited by those buyers that were present.  AWEX also noted that the opening decline extended across the Nullarbor, where lots of similar quality sold 20-30 cents cheaper than the previous week in Fremantle to begin the week.

Whilst the overall market saw some pricing recovery on Wednesday, the damage was done on Tuesday which saw a 20¢ decline for the Eastern Market Indicator (EMI) this week to 1152¢/kg.  Declines in Sydney were steepest, with 17MPG losing 34¢ to 1708¢/kg; however, in Melbourne, the broader categories saw some modest recoveries which helped to stem the bleeding. Melbourne 21MPG lost just 9¢ to 1328¢/kg.

After a short rally to begin the calendar year, the fine wool premium has continued to decline and the results in the Melbourne market this week demonstrate this. Figure 1 shows the Melbourne market 17MPG, 21MPG and the basis for both. The premium for 17MPG over broader 21MPG wool has narrowed to just 385¢/kg, a level not seen since 2020.

Although the losses were not as steep on the West Coast, the market did concede ground with the Western Market Indicator (WMI) dropping 15¢ to 1287¢/kg. Sensing the tide had turned on them, more sellers opted to withdraw lots on Wednesday, leading to a withdrawal rate of 9.5% in WA and the pass-in rate surpassed 10% for the week.   

Next week

Figure 2 shows the seasonality of wool bales sold at auction, and typically the next few months to the end of June volumes decline. As the wool market awaits meaningful demand signals from the global economy, the key to avoiding steep pricing declines will be to avoid supply shocks to the market.

Next week a higher offering of 41K bales is forecast, however the forecast volumes for the next few weeks are lower than the same sale week last year which could help. All centres are selling on Tuesday and Wednesday next week.

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Data sources: AWEX, AWI, Mecardo

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