THE rising wool market has punters baffled as to when it will lose steam, but most are tipping it will remain stable until the July recess.
After a massive 61-cent surge last week, the Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) closed last Thursday on at 1373 cents a kilogram - 336c/kg higher than the same time last year and a 24pc rise over the past eight weeks.
A slight 17-cent correction to the market this week brought the EMI back down to 1356c/kg on Thursday afternoon, with 4.7 per cent of the 34,941-bale offering passed in - the smallest three-centre offering in 12 months.
Independent wool consultant, Andrew Dennis, Rosewood Wool Services, Adelaide, South Australia, said the market had looked good for the last few weeks and looked set to continue its form.
“I expect the current market will hang around in the lead up to the recess due to the low volume of wool,” he said
Mr Dennis said there was not a drastic shortage of wool as the current supply was normal for this time of year.
“It’s just the mills need fodder to keep going and they are not stockpiling yet, so it’s going out the other end of the pipeline,” he said.
"So while there is still the demand, there is no reason for the market to correct unless the currency comes back."
Supply hampering NZ, South Africa
He said a lack of Merino wool supply in South Africa and New Zealand was also playing into the hands of Australian growers.
New Zealand will host a crossbred wool sale on North Island this week; however, its South Island sale booked for next week was cancelled due to lack of supply.
Only one more sale would be held in South Africa before its two month recess.
Mr Dennis said spring wool sales would test the firm market when there were 40,000 to 50,000 bales of wool up for auction in Australia and South Africa resumed its sales.
Setting AWEX records
AWEX senior market analyst Lionel Plunkett, Sydney, NSW, said there were mixed signals from the three centres on the opening day of this week's sales.
"The 104 cent rise at the one-day Fremantle sale was misleading as it was compared to a fortnight earlier," he said.
"Having missed the action last week when it paused for a one-week break, the surge in prices was simply a catch-up.
"On the east coast, Sydney gave no real direction and was mostly unchanged.
"Melbourne was cheaper by a considerable margin however, especially through the broader microns. It proved to be a strong lead as it was a similar story at the two-centre Thursday sale when both markets conceded ground."
Last week’s offering of 25,641 bales was the smallest in 12 months for a two-centre (Sydney and Melbourne) offering.
The 20 to 22 micron ranges were major market movers gaining upwards of 90c/kg.
The 22 micron price guide in Melbourne eclipsed its previous AWEX/AWC record (since 1979) when it surged last week to 1475c/kg clean.
Mr Plunkett said the smallest crossbred catalogue in nine months made further inroads into record territory with the best result achieved for the 25 to 28 micron range.
He also noted the Southern Merino Carding Indicator had run for 25 days without a loss, two days short of a record rally.
'Processing fraternity nervous'
Elders northern wool manager, Bruce McLeish, said the forward roster continued to make the processing fraternity nervous with an estimated offering of only 95,000 bales during the next three weeks.
However, he said keeping the current supply in perspective only 88,000 bales were offered during the corresponding three week period in 2014.
“The difference this year is that the pipeline outside of Australian remained very empty with mills continuing t purchase on a hand to mouth basis,” Mr McLeish said.
“Also the first two sale weeks in July are often large, prior to the three week recess, however, given the rally of late, hold stocks are already low with very little wool having been held over to the financial year as happened traditionally.”
Mr McLeish said new receivals in store had also slowed considerably at present, making it likely supply would continue to be tight right through until the end of the new season.
The three-week wool auction recess commences on July 13, and sales resume on August 3.
Time to move stockpiles
With prices on the rise, now is the time to get the wool out of the shed and on the market, agents say.
Quality Wool senior wool agent Robert Leak, Wagga Wagga, NSW, said everything from 16 micron wool clips to 30 micron bales had been booked in for sale since the wool price surged.
Mr Leak said traditionally winter was quiet time for wool sales out of the region as most growers shore in spring and summer, however, growers who had wool stored were keen to capitalise on the burgeoning market.
Every week the Wagga and Parkes Quality Wool stores had sent a B-double load of wool down to its Geelong warehouse.
"Any wool that growers had on hold is coming in now and it's a mixture of types from the fine Merino fleece wool to broad crossbred wool," he said.
Mr Leak said they had a crossbred wool clip brought in from west of Griffith that has been stored on farm since 2007.
"It's aged wool, low yielding and showing dirt due to the drought when it was grown, but the farmers had held off from selling until the price lifted," he said.
Mr Leak said while the timing of the strong wool market at present didn't fit with most shearing programs in the region, many larger scale wool growers had hedged their clip on the back of current prices for when they shear later in the year.
For those fortunate to have some wool on hand his message was clear: "get it in and sell now".
Dogged by predation
Queensland wool buyer Lachlan Digg, MacIntyre Wool, Goondiwindi, said business had picked up considerably in the last two months since there had been a kick in the wool market.
Mr Digg said woolgrowers who held onto their wool for the past six months were now keen to get their clip on the market.
“A lot of people are coming to me now to get their wool on the market, but six months ago they weren’t and we were doing it pretty tough,” he said.
Mr Digg said drought and wild dogs had impacted his clientele with 50 per cent now marketing a Dorper wool clip, and the remainder traditional Merino woolgrowers. Ten years ago they were all Merino producers.
“My clients are very happy with Merinos at the moment as the wool market is great and sheep are also worth good money," he said.
“It’s encouraging for growers, but wild dogs still remain the problem no matter where I go in Queensland.
“We are still losing growers through dogs and drought but not at the rate that were exiting the industry 10 years ago.”
Mr Digg said most woolgrowers had now invested in dog fences which had steadied the exodus from the industry.
“There’s a good return in wool but it’s just getting a handle on these dogs that’s the issue.”
Mr Digg picked up wool from five properties most days within a 300-kilometre radius of Goondiwindi, and was sending 40 bales a week to sale.
“For the past three weeks the wool market has been very good, hopefully it will level off and not drop off.”
- with FarmOnline