Wool market lacking inspiration

The Eastern Market Indicator (EMI) slipped 11¢ to settle at 1,087¢/kg, but again the market showed a lift of 6¢ gain in the EMI expressed in US$ terms, rising to 749¢/kg. The stronger Au$ delivered no benefit this week to buyers or sellers. The Western Market Indicator (WMI) also declined 6¢ to close at 1,228¢/kg.

 

Crossbred types fared no better, with 28 MPG in Melbourne finishing the week 16¢ weaker to 362¢/kg and 30MPG down 12¢ to 333¢/kg. 

 

There was no real joy in any aspects of the market, with all centres and types posting losses. AWEX reported that the Merino fleece sector led the falls. The only exception were Cardings in Melbourne and Fremantle which posted gains of 16¢/kg.

 

There is industry wide concern is that despite a 22.6% lower offering year-on-year, the market is showing no signs of anxiety in its capacity to meet demand. This confirms that demand is weak across the globe. While the “light at the end of the tunnel” is yet to appear, the industry can take some solace that wool is still moving through the pipeline, and the modest pass-in rates are preventing any significant build-up of stocks. Obviously the reduced offering is acting as a level of support.

 

History tells us that demand eventually recovers, and with reduced fresh wool supply forecast for the coming season, along with modest grower held stocks we could see quite strong upward market moves in the future when demand emerges. The question is how far into the future?

 

This week saw 28,292 bales sold of the 31,062 offered, with a pass in rate nationally of 8.9%. While the clearance was 736 bales more than last week, it was 1,952 behind these seasons weekly average and a massive 9,461 below the 2023-24 season average clearance.

 

This week on Mecardo, Andrew Woods looked at whether the EMI is still relevant  (read more here). The Eastern Market Indicator (EMI) is the default price series used for the Australian greasy wool market, as it is well known and has a history extending back to the 1980s. Change in the Australian flock structure has meant that the relevance of the EMI to the merino clip has progressively declined in recent decades.

The EMI is designed to reflect the general (average) price for wool sold at Australian greasy wool auctions and it does that reasonably well. With the changing structure of the wool clip, the relevance of the EMI to the average merino price has weakened, with the gap between the two series growing.