Producers pull wool before bidding starts

Producers pull wool before bidding starts


Resumption of open-cry auctions at the Western Wool Centre (WWC) last week, after a fourth no-sales week in the first nine weeks of the current wool season, failed to stop the price slide crisis for woolgrowers.


RESUMPTION of open-cry auctions at the Western Wool Centre (WWC) last week, after a fourth no-sales week in the first nine weeks of the current wool season, failed to stop the price slide crisis for woolgrowers.

According to Australian Wool Exchange (AWEX), they pulled 34.6 per cent of the fleece offering out of the auctions prior to bidding starting last week.

The trigger for the mass pre-auction exodus were indications that a returned WWC market was going to chase down further losses in Melbourne and Sydney - those centres had continued to trade the previous week when the WWC was closed to enable brokers and buyers to attend Wool Week in Melbourne.

Woolgrowers had withdrawn substantial amounts of wool from auctions in other WWC sales earlier this season too, as a signal of their displeasure at the prices dive since the first week of May and to indicate they were not going to accept lesser prices for their wool without at least putting up a fight.

But the woolgrowers' stand had the same impact on the market last week it had when tried previously this season - virtually none.

Buyers hit back by not bidding on or rejecting before prices reached reserve levels set by woolgrowers and brokers 46pc of the fleece wool that was left in the auction.

To put the current battle of wits between woolgrowers and buyers into context, it is worth remembering that those reserve prices last week would have been discounted, probably by between 50 cents and 100c a kilogram greasy, during the week's break at the WWC on the basis of the continued prices dive in Melbourne and Sydney.

But the woolgrowers' tactic of withdrawing more than a third of the offering prior to auction was somewhat thwarted by the fact that just over a quarter of the wool left in the auction, according to AWEX, had been rejected by buyers and passed in, presumably at higher prices, at previous auctions.

Of the 6891 bales across all market segments that did go up for auction on Wednesday and Thursday last week at the WWC, only 3854 or 44.1pc found a new home.

The overall withdrawn rate for the week ended up at 30.2pc.

Not even the Australian dollar dropping to US67.29 cents on Thursday, its lowest level in more than a decade and making Australian wool even cheaper when paid for in US dollars as our international customers do, could tempt buyers who seemingly have the upper hand.

It seems woolgrowers have few options left - if they need the cash they can instruct their broker to sell at any price or they can truck their wool back home and put it in the shed for another time.

Peter Howie, State manager and director of Dyson Jones Wool Marketing Services, agreed there was some "resistance" by woolgrowers to accepting the lower prices on offer.

"I think there's an element of some having to sell (their wool), but there is also a lot of wool now being stored on farm as growers have said they're not in any hurry to sell so they'll wait until the market stabalises and hopefully improves," Mr Howie said.

"That's particularly the case out in the Central Wheatbelt where they're now certain they'll get a crop this season, so they don't have to sell their wool to provide a farm income.

"I think the buyers might also support woolgrowers in resisting prices falling too much further because they realise that growers need to make money on their wool to ensure continuing supply into the future.

"But until the market settles, who knows?

"Once it does find a level then China might come back in."

Shearing contractors have reported a steady flow of work through winter with good sheep and lamb prices driving a higher than usual turnoff and farmers looking to maximise returns by shearing sheep and lambs before they go for sale.

But the steady rate of shearing through winter has not resulted in more wool being offered for auction so far this season at the WWC, which supports Mr Howie's assertion wool is being held on farm until the market improves.

In contrast to last week's small and recycled offering, a high withdrawal rate and even higher passed-in rate, the corresponding week nine auction results at the WWC last season show 10,427 bales were offered, of which 10,073 were sold.

Only 0.6pc of the offering was withdrawn prior to auction, only 3.4pc was passed in and buyers had only seen 7.9pc of it before.

As well, in week nine last season the Australian dollar was worth US72.52 cents, making a bale of wool cost roughly US$10 more in comparison to last week, simply because of the exchange rate.

According to AWEX, national turnover from week-nine wool auctions last week was down $61.13 million on the turnover from the same week last season.

Wool turnover last week was $26.12m, in week nine last year it was $87.25m.

Since July 1, gross national turnover from wool auctions is $267.17m, according to AWEX, a drop of $235.75m on the same period last season.

Playing catch up to Eastern States' markets, the Western Indicator plunged 182c to finish last week at 1416c/kg clean.

Mid micron wools at the broader end of the spectrum suffered most as prices continued to retreat, with the price guide for 21 micron wools losing 175c to finish at 1473c/kg at the WWC.

At the other end of the spectrum, the WWC's 18 micron price guide dropped 114c to 1603c/kg.

The WWC price guides have overtaken Melbourne and Sydney prices and are now lower across the 18-21 micron spread.

Finer micron wools prices at the WWC last week were up to 151c/kg cheaper than at the Melbourne auctions and up to 192c/kg than in Sydney.


From the front page

Sponsored by