Lively return tipped for Western Wool Centre

The first wool sales of January last year, and also of 2021, saw pent up demand drive solid price rises across the board in all fleece micron segments at the WWC - with larger-than-normal auction catalogues put together by brokers and woolgrowers correctly anticipating the demand.

Brokers are again travelling to regional areas calling on woolgrower clients, now that grain harvest is finished in most areas and farmers have the time to stop and talk about this season's wool clips - the majority of which will be shorn in late summer through to early autumn.

They expect pent up demand from buyers again at the year-opening WWC auctions this week and point to a couple of considerations in support of that hypothesis.

Firstly, the current exchange rate between Australian and United States dollars is much more favourable this week than it was the opening week sales of the past two years.

That means exported wool that is paid for in US dollars - as most is - will be comparatively cheaper on exchange rates alone, than similar specification wools for export bought the previous two years at opening sales.

This week is week 28 of the annual Australian wool selling program set by the National Auction Selling Committee and an Australian dollar is worth about US68 cents.

In week 28 last year, it was worth roughly US71c and in week 28 the previous year it was worth almost US76c.

On a 30-tonne container load of wool - a US3 cents a kilogram difference due to a lower exchange rate, compared to last year - amounts to about a US$9000 saving for a local wool trader or Chinese, Indian or Italian wool processor buying at the WWC this week.

Secondly, there is far more trading confidence between Australia and China - where more than 82 per cent of Australia's wool ends up, at least for early stage processing - than there was this time last year.

China has opened its borders to international travellers, so there can now be face-to-face contact again with wool buying clients and it has dropped its elimination policy on COVID-19, reducing risk of cities and ports being suddenly locked down, as happened on occasion in the past two years.

According to brokers, this has significantly improved industry confidence that exported wool loaded on a ship to China will be delivered in a relatively timely manner and not end up riding at anchor for a week or two off a suddenly shut down port.

As well, a resumption of face-to-face meetings between Australian Foreign Affairs Minister Penny Wong and her Chinese counterpart towards the end of last year bodes well for improved trade relations, not just for wool, which was considered by some to be at risk of tariffs or sanctions being imposed, but other commodities in general.

The only potential downside to this week's WWC auctions in some brokers' minds is the amount of wool available, with large local and national offerings and the main Melbourne wool selling centre starting the year with an extra trading day to deal with the volume, just as it has done in recent years.

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Australian Wool Exchange (AWEX) has forecast 12,327 bales will be offered at the WWC this week, down from an early estimate of 13,285 bales.

But the latest forecast is still significantly higher than the actual figure of 9016 bales offered in week 28 last year at the WWC.

Similarly, AWEX has adjusted its early estimate of 55,589 bales offered nationally down to 54,485 bales in its latest forecast for this week.

But that too is still a very significant increase over the 43,739 bales actually offered at this time last year.

It may not matter, provided the styles and quality of wools on offer match what wool buyers have orders for.