Volatility hides WA wool market gains

By Mal Gill
December 28 2021 - 5:00am
Shearer and shearer trainer Kevin Gellatly (centre), who has been part of the WA wool industry for 56 years, was presented with his Australian Wool Industry Medal by the only other two WA recipients of the medal, former shearing contractor and wool classing lecturer Rob Carter (left) and WA Shearing Industry Association president and Lake Grace contractor Darren Spencer.

RECOVERY seems an apt word to associate with the Western Australian wool market for 2021.

In stark contrast to 2020, which was clearly a tale of two wool markets - one pre-COVID-19, the other post-COVID arrival - the overwhelming and consistent trend across this year for the WA wool market was undoubtedly recovery.

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Quite a strong recovery.

But a lack of dynamic volatility, compared at least to the previous year, may well have disguised for many woolgrowers just how good this year actually was - at least by the statistics at any rate.

Analysis of Australian Wool Exchange (AWEX) data from live auctions at the Western Wool Centre (WWC) across the year shows a steady, rising, recovery trend, with more frequent bigger moves in a positive direction and fewer and smaller corrections when the market started to get ahead of demand.

The Western Market Indicator (WMI) - as a general guide to the overall strength or weakness of WWC markets - travelled week-on-week through a range of 279 cents for the year.

From a low of 1198c per kilogram clean to a calendar-year high of 1477c/kg, an increase in value of 23.2pc low-to-high for the year, according to the AWEX data.

The WMI ended the year at 1408c/kg, up 17.5pc on its starting price - a good sign for the new year, with plenty of consistent green feed available over the past year resulting in good, strong, sound wools from spring shearings and the same likely from coming autumn shearings.

Dyson Jones Wool Marketing Services broker Peter Ryan with a show floor sample of the 13.4 micron Serena Park fleece that reset the Western Wool Centre greasy price record at 3300 cents per kilogram early in the year.

But the important thing to realise about the WMI this year is that its opening price for the year was also its lowest price for the year.

When the first WWC live auction for 2021 started in the second week of January, the WMI was 1198c/kg.

As the first sale progressed the WMI moved above 1198c/kg and it never went back there.

It closed the first trading week at 1222c/kg, slipped to 1219c/kg by the end of the second week, then shot to 1292c/kg by the end of the third and final trading week in January - which was the last time the WMI was below 1300c/kg this year.

From February through to early June, the WMI climbed relatively steadily.

There were seven market corrections - usually associated with one or more of the brokers loading up the market on a particular week with stockpiled wool held over from the previous year when COVID had been a semi-permanent market dampener.

This pushed some weekly bale offerings well beyond the volume the market could bear in the first half of the year.

With Europe still struggling with COVID and mills and fashion houses there closed during the first half of the year and only small orders to fill from China, choosy buyers picked through the bigger offerings, taking only the best wools - not necessarily the finest wools - and leaving the rest to be put back into store for at least a fortnight before being presented at auction again.

This process was repeated a number of times with the same wools.

Some of the larger brokers seemed to be the main instigators of this - after all, they had the biggest stockpiles of average to lesser specification wools to clear before big volumes of better specification new-season wools from spring shearings started coming through the auction system.

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Auctioneers at some of the smaller brokerages scheduled to sell their catalogues immediately after the market- flooding culprits had tried to sell theirs, privately cursed that behaviour, blaming it for driving prices down in particular weeks and affecting financial returns to woolgrower clients who happened by chance to be selling clips that same week.

Nutrien Ag Solution's Rohan Gaunt (left), Fremantle Wool Trader's wool valuer Martina Delorenzi with a sample of the 14.4 micron Superfine fleece she identified in the Nutrien wool catalogue as the finest available in Australia that week and Fremantle Wool Trading director John Bradbury who said the wool would go to Italy to be processed into the "best of the best" yarn.

It also frustrated WWC buyers who regularly grumbled about seeing the same wools repeatedly coming up in catalogues after they had not been remotely interested in meeting growers' reserve prices the first time they saw it.

But in mid June, approaching the end of the financial year and the end of the previous selling season, with a series of small weekly offerings and two weeks where there was not enough wool available to warrant the WWC trading, prices spiked.

Following a week without trading, the WMI suddenly jumped 92c across the next week - its biggest weekly gain in 2021- pushing up to 1477c/kg, which was its first time above 1400c for the year and ultimately its peak for the year.

Only 3pc of the 7713 fleece wool bales offered that week, failed to attract a buyer.

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The WWC's 19.5 micron fleece price guide jumped 138c for the week to finish at 1655c/kg - the biggest weekly price rise of the year.

The 18 micron guide added 132c - which was the second biggest rise of the year - to 2146c/kg and the 20 micron guide added 129c to 1481c/kg.

There were no wool sales at the WWC the following week, but when auctions returned for the final sale week of last season, demand had been fulfilled and the WMI shed 37c.

It bobbled for a fortnight before live wool auctions took their annual three-week recess in July and August.

A return to trading mid-August after the recess saw the WMI take its biggest weekly tumble for the year, down 56 to 1406c/kg.

The following week - week seven of the current selling season - there were more worried looks on brokers' faces and uncertainty over what they might tell clients, after the WMI plunged a further 55c, down to 1351c/kg after five trading weeks above 1400c.

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That week the WWC's 18 micron fleece price guide plunged 102c to 1946c/kg - the biggest fall of the year - and the 19 micron guide shed 99c to 1609c/kg - the second biggest fall of the year.

But by the end of week 16 of the current selling season - mid October - the WMI was back above 1400c, albeit just, at 1401c/kg and only for a week.

Proud Australian Wool Network auctioneer Stephen 'Squizzy' Squire uses his gavel handle to point to the 2850 cents per kilogram top price he just sold wool produced by his clients Neville and Kaye Dalton, Kojonup, for. Mr Squire did even better for the Daltons in November. He sold a bale of their 14.1 Superfine merino fleece wool for a Western Wool Centre record greasy price of 3600c/kg.

A fortnight later it was back just above 1400c for another week, before slipping back under for the next two weeks.

The WMI bounced back above 1400c the following week and stayed up there for the remaining three trading weeks of the year.

AWEX statistics show that for the 42 trading weeks of 2021, the WMI increased in value across 25 of them and lost value in 16 of them - it also marked time for just one week.

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Nine of the weeks with losses were in the first half of the year, seven were in the second half.

The WMI finished 11 weeks above 1400c - nine of them in the second half of the year - and finished below 1300c on only three weeks right at the start of the year.

So, a generally positive trend for wool prices despite continued difficult trading conditions.

No wool growers were allowed into the WWC this year to watch their clip sold and early in the year there were occasions when masks were required to be worn by buyers and brokers.

The perspex screen between auctioneers and buyers seated in front of them also made the occasional reappearance - some auctioneers hated the screen because they claim it bounced their voice straight back at them and muffled buyers' bids.

More generally though, the WA wool year was bookended by presentations of the prestigious Australian Wool Industry Medal to two WA wool industry icons.

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Shearer, shearer trainer, former shearing contractor and Australian Shearing Hall of Fame inductee Kevin Gellatly, 72, became only the third Western Australian to be presented with the Australian Wool Industry Medal in January.

WA's two other recipients of the medal - WA Shearing Industry Association (WASIA) president and Lake Grace shearing contractor Darren Spencer, who received his in 2019, and former Narrogin shearing contractor, now wool classing lecturer, Rob Carter, who was one of 11 industry identities to receive the inaugural medal in 2017 - made the presentation at the WASIA annual meeting.

Retired wool broker and auctioneer Terry Winfield with a 1984 copy of Elders Weekly featuring him dressed as Father Christmas on the front page. He was Elders' State wool manager at the time, after starting with the company in 1962 as an office boy. Mr Winfield spent 59 years in the wool industry, including with Primaries of WA and with Nutrien Ag Solutions. He retired from full-time work in October but still auctions wool on contract part-time at the Western Wool Centre.

Mr Gellatly, who has been in the industry for 56 years and training learner and improver shearers for 17 years, admitted to being "pretty emotional" on receiving the medal which was awarded for "an exceptional and sustained contribution to the Australian wool industry".

"I don't do things to get accolades, I do it because I think it's the right thing to do to give something back and I try to help young people get into the industry," Mr Gellatly said.

At the other end of the year, at a special WWC sale room presentation during a break in the last week of trading, co-founder 42 years ago of what is now Dyson Wool Marketing Services and a staunch defender of private treaty wool buying when it was under threat, Ken Dyson, 82, became the fourth West Australian to receive an Australian Wool Industry Medal.

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You can read about Mr Dyson and his medal in this edition of Farm Weekly.

Wandoo Valley, Kojonup, woolgrowers Neville and Kaye Dalton also achieved enviable bookends for the year with last year's wool clip sold in January this year, and this year's wool clip sold at the end of November.

Last year's clip, shorn in September and October but stored until this year, included seven bales of 13.8 micron Superfine Merino wool which were the finest offered anywhere in Australia the week they were put up for sale at the WWC.

A two-bale lot of the Dalton's wool sold for 2850c/kg greasy, the best price at the WWC that week and one of the then best greasy prices at the WWC since the 2018 wool market peak.

Its equivalent Schlumberger dry 'clean' price of 4582c/kg was the top clean price in Australia that week.

But in November - after moving their usual January sale forward on the advice of AWN broker Stephen 'Squizzy' Squire, the Daltons did even better with this year's Superfine wool.

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Volatility hides WA wool market gains

A 202 kilogram bale of their 14.1 micron wool sold for $7272, making it possibly the most expensive bale of greasy wool ever sold at the WWC.

At 3600c/kg, it was certainly the highest greasy wool price recorded at the WWC in the past 10 years, AWEX technical controller Andrew Rickwood confirmed.

The wool's technical specifications were 71 millimetres staple length, 32N/kt strength, a comfort factor of 99.8 per cent and yield of 69.9pc.

On both occasions Mr Squire was also the auctioneer selling the Daltons' wool and admitted he struggled to keep the smile off his face as he called bids.

The Dalton's top price set a new modern-era WWC benchmark, smashing the greasy price record of 3300c/kg (5331c/kg clean) which had been set in February by a single-bale lot of 13.4 micron Serena Park, York, fleece.

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In fact, on that February sale day 10 single-bale lots of Serena Park-branded fleece, ranging from 12.9 micron to 13.9 microns, had bettered the WWC's previous 2018 greasy price record of 3090c/kg.

Dyson Jones Wool Marketing Services auctioneer Lyndon Hosking sold the entire 32-bale Serena Park Superfine clip that day for an average price of 2300c/kg.

A number of times in the early part of the year when buyers' interest was particularly focussed on Superfine Merino wool, individual lots of WA wools at the WWC achieved the best daily and weekly prices in Australia.

But while the local wool market recovery continued through the year, supply chain issues beyond the control of anyone in Australia continued to act as a dragging anchor on global demand and the rate of recovery of the WA wool market.

The cost of shipping a container of wool increased more than five-fold throughout the year and the cost of getting wool to Europe as the market there began opening up in the second half of this year, was particularly volatile.

Sea containers were hard to find as shipping lines resumed runs previously shut down by global COVID restrictions, causing costs to escalate and deck space for them on freighters was even harder to pin down and significantly more costly.

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Geoff and Linda Bilney, Glenpadden Farms, Kojonup, on the boards of their innovative shearing shed. They finally held an open day in March, attended by 300 people, after having to cancel it twice because of COVID.

Disrupted shipping schedules meant some vessels on the Australia-China run only serviced Eastern States' ports and bypassed Fremantle, while more accessible Fremantle-Singapore shipping got wool to Singapore where it was sometimes off-loaded and sat on the dock for a month or more at a time while shipping lines gave precedent to more lucrative China-Europe cargoes.

Peter Morris, owner of the biggest local wool trader, PJ Morris Wools, at one stage described the shipping situation as "a nightmare" for local exporters.

Smaller, specialist wool exporters supplying European mills and fashion houses were hardest hit by the shipping problems.

Low volumes meant they were at the back of the queue in shipping customer priority and their business cash-flow situations meant they were less able to absorb late payments due to delivery delays beyond their control.

Watching who bid week to week at the WWC it seemed clear that some wool buyer-exporters simply ran out of funds on occasions and could not bid on lots that they would normally contest for the types of wools they specialise in.

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For woolgrowers, 2021 was also a chance to have their say on how much they were prepared to pay in wool levy to part-fund the industry's prime research and marketing body, Australian Wool Innovation (AWI).

At WoolPoll 2018 WA woolgrowers had led a successful campaign to reduce the levy for the first time since its inception from 2pc to 1.5pc of gross return from growers' wool sales.

WoolPoll 2021 was the first opportunity to review that decision and its impact over the past three years on AWI's ability to fund its operations and on its priorities.

In WA, the most obvious AWI expenditure was on funding shearing and wool handling schools for novices and improvers.

It maintained its normal number of scheduled schools and partnered with the State government to continue funding extra shearing and wool handling schools throughout the year.

Many graduates from those schools ended up on learner stands with shearing contractors, with the schools providing an important source of shearing shed staff when COVID-19 border restrictions and quarantine requirements made it difficult and removed financial incentives for interstate or New Zealand shearers to travel to WA to help with spring shearing.

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In February Corrigin woolgrower and Claypans Merino stud co-principal, Steven Bolt and Boyup Brook commercial sheep operation manager Michael Wright were appointed as WA representatives on an eight-member independent WoolPoll committee to oversee WoolPoll 2021.

Graduates from a Nungarin shearing and wool handling school, Alfred Thomas-Headley (back left), Haki Matchitt, Ashley Talbot from Department of Primary Industries and Regional Development, Zane Long, Sonny Kimura, Finba Ford (middle left), Mana King, Aubrey Nelson, Agriculture MLC Darren West, Brodie Swankie and Stephen McCarthy (front).

Mr Bolt was subsequently elected committee chairman and their roles throughout the year were to engage with and encourage woolgrowers to have their say by voting between September 13 and November 5.

Statutory regulation required wool levy options of 0pc, 1pc, 1.5pc and 2pc to be put to voters and AWI added a fifth option of 2.5pc.

Woolgrowers in WA and across Australia voted with a clear majority to retain the 1.5pc levy rate as well as the three-year cycle for WoolPoll.

While the levy rate remained unchanged, this year was one of change at the top for AWI.

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Chairwoman for the past three years Colette Garnsey stood down, with New South Wales woolgrower Jock Lawrie elected as her replacement in June.

From questions and responses at Federal government hearings, it was no secret there were differing views between the leadership at AWI and Federal Agriculture Minister David Littleproud - who controlled the purse strings to half of AWI's research funding - following the 2018 review of AWI's performance and governance.

In October, AWI announced its chief executive officer of 12 years, Stuart McCullough, had accepted a new overseas posting as chief marketing and innovation officer at the same salary level, for AWI.

AWI chief operations officer, John Roberts, who has 30 years' experience in all facets of the wool industry around the globe, was appointed acting chief executive officer.

At the annual meeting in November, Ms Garnsey retired after 10 years as a director and one new director Georgia Hack, an accomplished retail marketing professional like Ms Garnsey, was welcomed to the AWI board.

Mr Laurie and sitting director Don Macdonald were returned to the board at this year's AWI director elections for another three years.

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