WOOL buyers waiting to pick the bottom of the Australian dollar’s fall against the US dollar, the international wool trading currency, appear to have hit their mark last week.
Buyers representing major Chinese wool scouring and processing interests largely stayed out of the Western Wool Centre (WWC) live auction market until the local dollar bottomed at US74.79 cents.
Then they piled back in.
Renewed demand turned the market around last Thursday and sent prices heading back towards the record territory from the previous week.
As reported last week in Farm Weekly, the Thursday after Anzac Day saw an unusual slide in both the Australian dollar’s value and wool prices at the WWC, despite the dollar’s dip effectively making wool cheaper on international markets.
One wool buyer explained the phenomenon as the major Chinese buyers being “spooked by the double dip” – large losses in dollar value on successive days – and holding back to see how far the dollar was likely to fall.
By the next WWC trading day, Wednesday last week, the dollar’s value had slid further, and so wool prices continued to follow it down, with little apparent appetite for the wool on offer.
The “softer tone”, as Australian Wool Exchange (AWEX) technical controller at the WWC Andrew Rickwood described it in his market report, from the previous week “carried” into Wednesday’s trading last week.
“There continues to be a high number of wools yielding below 60 per cent dry and buyers are continuing to discount these lots, contributing to the reduction in the market,” Mr Rickwood said of Wednesday’s trading.
The Western Indicator, a guide to the general strength of the WA wool market, slid a further 10c to 1939c a kilogram clean, according to AWEX statistics.
Price guides for 18.5 to 21 micron wools lost between 15c and 6c, with the finer end of the spectrum losing most ground.
Merino cardings were difficult to sell with the price guide dropping 24c.
A passed-in rate of 8.3pc of the 4204-bale offering was recorded by AWEX at the WWC, well above the national passed-in rate of 5.5pc.
PJ Morris Wools led the buyers, taking 17.2pc of the offering and Lempriere (Australia) was second, taking 11.9pc.
Of the two biggest Chinese buyers which normally take the major share of wool on offer, Seatech Industrial was third on the day, taking 11.8pc, and Tianyu Wool was fifth with 9.6pc.
But during Wednesday the dollar stopped sliding at US74.79c, steadied and began climbing back towards US75c.
By Thursday morning it had made a couple of runs at US75c and seemed likely to break through that notional barrier.
That was a strong enough signal for wool buyers and Thursday’s trade was brisker from the get go.
“The Fremantle fleece market opened very strongly and quickly regained the losses experienced at yesterday’s sale,” Mr Rickwood said in Thursday’s market report.
“Prices then continued to slowly but noticeably rise as the sale progressed,” he said.
The Western Indicator rebounded 13c to finish the week up 3c overall at 1952c/kg and back to within 13c of its April 24 all-time high of 1965c/kg.
This contrasted sharply with falls across most micron price guides on both the Melbourne and Sydney wool markets on Thursday, sending the benchmark Eastern Indicator down 10c for the week to 1836c/kg and, in US currency, down 17c to 1381c/kg.
Staple WA wools, 19, 19.5 and 20 microns, led the way at the WWC with increases of 21c, 29c and 26c respectively.
PJ Morris Wools continued as main buyer, taking 15.9pc of Thursday’s 4127-bale offering, but Tianyu Wool stepped up to second with 12.9pc and Lempriere was third with 10.8pc.
After being in the top three buyers on Wednesday when prices were going down, Seatech Industrial’s buyer Alan Brown was very much a spectator on Thursday, taking only 4.7pc of the offering.
By Friday the Australian dollar was back above US75c – at one stage on Friday hitting US75.59c before settling to about 75.39 over the weekend and stepping down to about 75.15 earlier this week.
AWEX wool sales nationally last week generated $79.25 million in turnover.
If turnover this week matches that, it will push the total AWEX wool sales turnover so far this season past $3 billion.
However, bales numbers on offer this week both at the WWC and nationally are expected to be down significantly on last week as the season tails off.
Bales on offer at auction at the WWC this week will be down to 6309, from 8331 last week.
Nationally bale numbers will drop from 42,794 to 38,292 this week.