Wool market momentum dips

25 Jun, 2015 02:00 AM
Comments
1
 
Naturally, buyers chose to defer purchasing until the larger offering was available

THE wool market continues to lose steam ahead of the July recess, with another 36 cents a kilogram clipped from the Australian Wool Exchange Eastern Market Indicator (AWEX EMI) last week.

The downbeat result for the EMI made for the largest weekly fall in two years and was also on the back of a 17c/kg dip the week prior.

However, the AWEX EMI was 299c/kg ahead of the same time last year (59c/kg higher in US dollar terms).

AWEX senior market analyst Lionel Plunkett said the Merino fleece sector was the main area that weighed down the EMI.

"Falls of 50 to 60 cents clean over the week were fairly typical of movements in the Micron Price Guides (MPGs)," he said.

He said the price reductions were more heavily weighted toward the medium and broader micron types.

Mr Plunkett said most microns closed for the week in the red, with Merino skirtings losing 20 to 40 cents.

The Merino Carding Indicator (MCI) fell in both regions, its first weekly fall since early March.

This fall also ended the record 14 consecutive weeks of rises the MCI had experienced in Melbourne.

Only Sydney and Melbourne sales operated, as Fremantle now operates on a fortnightly selling program. Hence, last week's was the smallest national offering for the 2014/15 selling season, at 23,622 bales, of which seven per cent was passed in.

Too high, too quickly

Elders northern wool manager Bruce McLeish said no doubt the owners of the passed-in wool were left wondering why such a small sales volume failed to push prices higher.

"The answer lies in part in the forward roster that suddenly showed an increase of more than 30 per cent as growers jammed wool into the final sale for the season, presumably on advice of their accountants," he said.

"So naturally, buyers chose to defer purchasing until the larger offering was available."

He said the other reason prices eased last week was the perception the market had simply gone too high, too quickly and a correction was the predictable result.

Mr McLeish said there were indications China had adequate supplies of greasy wool and would not panic buy, as had been the case in previous weeks.

He tipped the market would tread water until physical sales resumed in August.

"Growers selling medium Merino wool in the next three weeks are reminded the price is some 300c/kg higher than last year and meet the market rather than risk passing wools."

Prices at top end in Aus terms only

National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said despite the pull-back in the past two weeks, the current EMI in Australian dollar terms was still at the top end of the price levels recorded in the past decade.

He said the current EMI of 1320c/kg was around the 97pc percentile (meaning the EMI has only been higher in three per cent of the weeks since January 2004).

However, he said the story was a bit different when looked at in US dollar (USD) terms, as the current EMI of 1021c/kg (USD) was around the 80th percentile, well above the median but also well below the peak of 1494c/kg (USD).

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its quarterly forecast last week and forecast a lift for the annual average EMI in 2015/16 from its earlier March forecast, from an average of 1075c/kg to 1230c/kg.

Mr Wilcox said this reflected a much higher average for the 2014/15 season, currently at 1118c/kg.

"The new forecast from ABARES is 90 cents lower than the current level of the EMI (1320c/kg), which implies a decline from current levels," he said.

"No surprise there, really. However, I wonder if the annual average forecast by ABARES may still be a little optimistic for the 2015/16 season."

He said previously prices had fallen back by more after reaching a peak.

Flock forecasts

ABARES also predicted that the Australian sheep flock would be 70.1 million head on June 30, 2015, down from the ABS final estimate of 72.6m head.

This compares with the Australian Wool Production Forecasting Committee's initial estimate in April of 69.1m head.

As a result of the lower sheep numbers, ABARES forecasts a 2.9pc drop in shorn wool production in 2015/16.

Both sheep and lamb prices were predicted to increase again in 2015/16.

The final series of wool sales for the 2014/15 season are held this week, with AWEX forecasting a 48,846-bale offering.

The three-week wool sales recess will commence next week.

Page:
2
FarmOnline

Cara Jeffery

is the national sheep and wool writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

halfcocked
25/06/2015 5:15:39 PM

This wool boom lasted about as long as a great ride at a rodeo. 8 bucking seconds

POST A COMMENT


Screen name *
Email address *
Remember me?
Comment *
 

COMMENTS

light grey arrow
I'm one of the people who want marijuana to be legalized, some city have been approved it but
light grey arrow
#blueysmegacarshowandcruise2019 10 years on Daniels Ute will be apart of another massive cause.
light grey arrow
Australia's live animal trade is nothing but a blood stained industry that suits those who