WESTERN AUSTRALIA led Australia’s wool markets into historic record territory recently with the Western Indicator (WI) becoming the first Australian regional wool market indicator to smash through a notional $20 a kilogram barrier.
Recognised as a guide to the general strength of WA’s Merino wool market, the WI set consecutive trading day records last week to finish up 66 cents for the week at 2018 cents per kilogram clean – an all-time high.
Prior to last week, its previous record price of 1965c/kg was set on April 24 and before that, 1934c/kg set on April 19.
In an unprecedented run since opening the year with a then record of 1875c/kg on the January 10 first trading day, the WI has gone on to set seven more records, according to Australian Wool Exchange (AWEX) statistics.
It smashed though the 1900c/kg barrier for the first time on February 8 and through the 2000c/kg barrier on Wednesday last week.
With crossbred wools comprising only 2.7 per cent of Wednesday’s and 4pc of Thursday’s live auction offerings at the Western Wool Centre (WWC) and therefore not included in the WI calculation, the WI record is considered an accurate measure of international demand for WA Merino wool.
The Southern (Melbourne) and Northern (Sydney) regional indicators and Australian wool’s benchmark Eastern Market Indicator (EMI) also set records last week, finishing on highs but remaining below 2000c/kg.
The Southern Indicator finished up 59c for the week at 1859c/kg, the Northern Indicator up 48c at 1940c/kg and the EMI up 55c at 1891c/kg.
AWEX market information officer Lionel Plunkett said those Eastern States’ indicators included a component of significantly cheaper crossbred wools in their calculation.
“Whereas the Western is a purely Merino-centric indicator,” Mr Plunkett pointed out.
At the WWC on Thursday the 17.5, 19, 19.5, 20, 21 and 22 micron price guides all joined the WI in setting records – the 20, 21 and 22 guides setting consecutive trading day records like the WI.
Apart from the 19 micron price guide, which set an AWEX record hold since 1995 but still has a way to go to catch up to its 1988 Australian Wool Corporation record of 2499c/kg, all of the other WWC price guide records were “all-time records”, Mr Plunkett confirmed.
For the first time in five trading days the WWC regional market summary on Wednesday quoted a price for 17.5 micron wool, which then jumped a further 49c/kg on Thursday to finish the week at 2508c/kg, its highest level since that guide was created in July 2006.
Price guides for 18 and 18.5 micron wools jumped 90c and 85c, the biggest price moves for the week at the WWC according to AWEX, but at 2346c/kg and 2238c/kg respectively, still finished 13c and 17c shy of their January 11 record prices.
The 19 and 19.5 micron guides climbed 78c and 70c for the week to 2171c/kg and 2113c/kg, while the 20, 21 and 22 micron guides ended the week at 2076, 2036 and 2029c/kg, up 72c, 67c and 82c.
It was a similar story for wool prices in Melbourne and Sydney but with a records focus on the broader microns, AWEX statistics showed.
In Melbourne, all price guides across the spectrum from 19.5 to 26 micron and in Sydney 19.5-21 guides set records, with prices generally within 12c/kg of WA prices.
The run of record prices across the three live auction markets pushed wool turnover beyond $3 billion in a season for the first time and there are still eight selling days at the WWC left in the season after this week and 12 each at the Melbourne and Sydney wool centres.
“It’s another all-time record,” Mr Plunkett said.
“We’re on target to finish the season with a national wool turnover of $3.3 to $3.4b.
“Last season the turnover was $2.75b.
“If we get to $3.4b this season, that’ll be a 20pc increase in turnover in a season which is pretty significant.”
Mr Plunkett said he could not recall another season of wool sales like the current one.
“Unprecedented would be a good way putting it,” he said.
“(Indicators and price guides) have been setting and resetting records – which in itself is a record.”
He said there appeared no extraordinary reason for this other than the “supply and demand” equation, aided by the Australian dollar’s movement in relation to the United States currency.
Wool is traded internationally in US dollars and on Wednesday and Thursday last week the Australian dollar had dipped below US75c – making Australian wool relatively cheaper for Chinese, European and Indian buyers – but was clawing its way back towards US75c.
It then spent the remainder of last week and this week at or above that level, making wool potentially more expensive for international buyers this week than it was last week.
“It’s the usual thing with market trends, in a strong market and prices trending up, buyers want to put their foot on any wool they can because it might be dearer tomorrow,” Mr Plunkett said.
“In a softer market with prices starting to trend down, they become much more selective about specification and hold off (buying) when they can because it might be cheaper tomorrow.”
Mr Plunkett’s observations about wool specification being less important in a strong market were echoed by WWC technical controller Andrew Rickwood in his regional market summary after Wednesday’s trading last week.
“Despite the offering containing many lower yielding lots, all types and descriptions across the entire Merino spectrum, have recorded general gains of 40c to 60c,” Mr Rickwood said.
“The price rises brought willing sellers to the market and more than 98pc of the fleece was sold,” he said.
The wool supply and demand equation is expected to improve slightly on the supply side this week at the WWC, with the number of bales on offer increasing by 311 to 6964 bales.
But a national offering of 37,496 bales will be down 346 on last week.
Last week’s exceptional run of price records coincided with a sudden and marked tightening of supply as the season winds down.
At the WWC, 1678 fewer bales were offered than the week before and the national offering was 4952 bales down on the previous week.
Early AWEX forecasts show national bale numbers dropping significantly again next week, which may have an affect on demand and prices this week.