Supply question hangs over wool market

Supply question hangs over wool market


Sheep
Primaries of WA wool manager Greg Tilbrook believes declining wool volumes will be a concern as the current season winds down with only five more selling weeks at the Western Wool Centre.

Primaries of WA wool manager Greg Tilbrook believes declining wool volumes will be a concern as the current season winds down with only five more selling weeks at the Western Wool Centre.

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Demand for rapidly shrinking supplies on offer at Western Wool Centre (WWC) live auctions this week is expected to indicate how the remaining five weeks of wool sales this financial year is likely to play out.

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DEMAND for rapidly shrinking supplies on offer at Western Wool Centre (WWC) live auctions this week is expected to indicate how the remaining five weeks of wool sales this financial year is likely to play out.

Last Thursday the WWC market finished strongly to end a positive week, carried mainly by local traders, PJ Morris Exports and Techwool Trading, along with Chinese buyer Tianyu Wool, but without much help from the other major Chinese woollen mills supplier Seatech Industrial.

But last week's welcome price rally - the Western Indicator (WI) jumped 28 cents per kilogram clean and the 18-19.5 micron price guides spread increased between 26c/kg and 35c/kg for the week, according to Australian Wool Exchange (AWEX) - may not be indicative of what is to come in the remaining sales this season.

Indeed, some brokers were muttering "Well, that's the surge over with", at the end of Thursday's trade, despite the market strengthening late in the sale.

Pent-up demand and a bigger selection of wools on offer last week, as a result of no sales the previous week due to Easter and Anzac Day holidays, and strong seller resistance to downward price pressures, may have conspired to disguise a continuation into May of the general softening of WA's wool market through April and March.

The raw AWEX statistics for last week were 10,820 bales offered, 9578 of which sold, with a passed-in rate of 11.5pc.

Of the bales on offer, 13.3pc had been offered and rejected or had failed to reach a reserve price at a previous auction and 10.2pc were withdrawn prior to sale.

Significantly, that took the WWC total offering so far this season to 299,209 bales, down 24,528 on the same time last season.

The total sold was 256,887, down 41,692, with 14.1pc passed in and 9.3pc re-offered, but only 5pc withdrawn.

With wool volumes in the Eastern States cut by up to almost 25pc and quality down due to drought, more pressure is on the WA market to fill selection gaps left by the depleted Sydney and Melbourne AWEX selling centre offerings.

But the WA wools over the past two months have not been able to, with buyers saying it is "impossible" to improve the average of lesser quality Eastern Etates' drought wools with what is on offer in WA.

So dwindling supply may be the determining factor now for remaining WWC sale days as the market resumes what brokers and buyers consider "normal trading" this week.

The offering is set to shrink by 42 per cent, or 4562 bales, this week - down to an estimated 6525 bales, compared to last week's which was bloated by the extra half week of wool trickling into woolstores.

The national offering is estimated to be down 9589 bales or 22pc to 33,464.

An early WWC offering estimate for next week (week 46 of the financial year) is 7900 bales out of a national total of 34,446 and for week 47 it is 7600 out of a 30,719 national total.

AWEX technical controller at the WWC Andrew Rickwood said sale volumes had reached the point where "we are about to have that conversation" between brokers and wool buyers to decide whether to split small offerings over two sale days a week or simply put it all up at one big sale a week.

Brokers admit most woolgrowers are now on tractors and sowing crops or winter pastures, they do not want to see their wool broker or talk wool strategy and, depending on which broker you talk to, the flow of wool into woolstores has either dried up completely now, or is about to.

The WWC selling schedule already has week 49 and 51 marked down for no sales.

Last year WWC trading was also restricted to one-day sales for weeks 47, 48 and 50 due to a lack of wool.

On this week - week 45 - last year prices at the WWC set records for the 19-22 micron guides and the WI and they were re-set in week 46, along with records for the 17.5-18.5 micron guides.

No one is expecting that to be repeated this year.

Primaries of WA wool manager Greg Tilbrook confirmed a lack of volume would be "a concern" in coming weeks.

"But you have to remember, volume dries up at this time of year, every year," said Mr Tilbrook.

"This year it's about cut per head and what we are seeing is the tail end result of a dry May, June and July last year."

He said a good winter and spring could see WA's wool supply recover but it might take between five and 10 years to breed up and rebuild New South Wales' depleted flocks and see Eastern States' wool volumes come back up.

If the WWC market continued to firm this week, it could draw some wool out of sheds and woolstores, Mr Tilbrook said.

"There is a little bit of wool on hold," he said.

Modiano Australia wool buyer Greg Horne said he believed plenty of the wool he will inspect in coming weeks he will have seen before.

Asked if he thought a lot of the wool passed in or withdrawn in April auctions might come back again in May and June to bolster declining supply, Mr Horne replied "I think that's what will happen".

In market reports during April, Mr Rickwood regularly highlighted higher than usual passed-in rates, sometimes as high as 26pc for fleece, with the wool going back into store.

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