Wool cut is king this year say brokers

New-season wool is flowing into WA wool stores and, with wool auctions resuming last week after the national annual three-week live auction recess, flowing back out again onto the market just as quickly.

According to Australian Wool Exchange (AWEX), last week's 52,000-bale national offering at the Western Wool Centre (WWC) and Melbourne and Sydney centres was the largest since January.

It was also the largest post-recess opening-sale offering for five years.

After six sale days at the WWC so far this season, bale numbers are up 14.5 per cent on the same period last season and of those, first-time offered bale numbers have jumped 21.3pc, according to AWEX statistics.

But the new-wool auction action so far seems confined to WA. By way of comparison, the corresponding total bale numbers so far this season are up only 0.9pc in Sydney and down 1.2pc in Melbourne, and the first-time offerings are down 0.7pc in Sydney and 1.7pc in Melbourne.

"New-season wool is coming in and it is not being held," confirmed Elders' WA wool sales manager Danny Burkett after last week's WWC sales.

"Seeding finished early and cleanly this season so many growers have taken advantage of that to bring their shearing forward.

"But the recent wet weather has now delayed shearing for a bit."

Brokers have mixed views on the new season clip yields.

Mr Burkett described yields as "good" and said there is "a definite distinction between the new-season wool and the wool that is being reoffered from store from three or four years ago".

There was also a definite distinction in pricing too, he said, with new wool bringing better returns for growers.

But if growers had concerns about the season ahead they should talk to their broker and "lock in a price" on the forward market, Mr Burkett advised.

Primaries of WA wool manager Greg Tilbrook was not so upbeat.

"From what we've seen, yields are down a little bit on what some people were expecting and there's a lot of grease in the wool this year," Mr Tilbrook said.

He inferred that because of the wet year sheep in some areas had turned the extra energy from abundant green feed into lanolin rather than wool.

"We're seeing some base break, about 10 to 15 millimetres off the skin, in the wool that is coming in," Mr Tilbrook said.

"That probably goes back to a wet April-May when some of the feed was very watery, and to lambing.

"The base break in the wool shorn now is not a problem because it still gives a good processing length for the mills to work with, but for the wool shorn later in the year the break will have moved along.

"There is some concern we could see higher levels of mid-break wool in October and at the moment the discount for mid-break is quite high.

"There's been a lack of support generally for faultier types - colour, cot (cotted wool) or VM (vegetable matter), but having said that, 650 cents (greasy) a kilogram for faulty pieces, which is what we are getting, is still an exceptional price.

"Four or five years ago that was what we were getting for fleece wool."

But with pricing gaps between different micron wool brackets continuing to diminish at last week's sales, brokers agreed that wool's economics pendulum - at least for WA - has swung from finer microns across to heavier cut.

AWEX statistics indicate that on last week's prices a six kilogram clip was worth roughly $9 a head more than a 5kg clip across 19 to 23 micron fleece and a 7kg clip was worth $10 more than a 6kg clip across 19-21 micron fleece.

The indicative price premium paid for 19 micron wool over 21 micron wool last week, was only 20c/kg.

Australian Wool Innovation (AWI) summed up the situation in its weekly wool market report on Friday.

"Obviously with the cut per head advantage, the broader wools are in front by quite some way as far as returns go," the AWI report said.

Mr Burkett was more succinct.

"Cut is king this year," he said.

Mr Tilbrook said he believed woolgrowers would be selecting rams this season with the longer-term aim of building wool yield.

"I think they'll be paying attention to wool cut and getting more bulk than aiming for finer wool.

"When you look at the price spread across the microns it's not much - 30c/kg across 19.5 to 23 micron - and our biggest customer, the Chinese, prefer the mid-micron wools anyway.

"Rather than looking at higher prices for finer microns, I think growers will be looking at increasing their cut by one to two kilos a sheep because ultimately, that's where the value is."

On the first day back after the recess WA growers showed more reluctance than their eastern States counterparts to accepting a soft market and price slide.

With a large offering for this time of year of 5409 bales at the WWC, 723 or 13.4pc was passed in, exactly double the pass-in rate at the Melbourne centre and slightly more than double the pass-in rate at the Sydney centre.

This was acknowledged by new AWEX technical officer at the WWC Andrew Rickwood in his market report.

"A pass-in rate of more than 13pc helped to maintain price levels as growers were resistant to accepting the modest reduction in prices," Mr Rickwood reported.

The resistance did not last into the second day with a bigger offering of 5499 bales - and a gentle price slide continued, but the pass-in rate dropped back to 6pc.

The Western Indicator finished the week down 17c to 1397c/kg clean.

Finer 18 and 18.5-micron wools slipped 31c and 25c for the week and 20 and 21-micron wools eased 13c and 15c.

After a quiet couple of weeks before the recess, Chinatex was back in the market and looking to restock its Chinese mill clients on the first sale day back.

It bought 22.9pc of that day's offering, ahead of West Coast Wools with 14.4pc and Lempriere with 13.1pc.

On the second day it was pipped by PJ Morris Wool as biggest buyer, with Morris taking 19.9pc and Chinatex 17.9pc in a bidding war between the two.

This week the combined two-day offering at the WWC is set to drop back to 7589 bales and the softer offering is expected to help stop the price slide getting any steeper.