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Friday, July 12, 2019

Buyers complete orders before winter recess

By Robert Herrmann & Matthew McAdam  |  Source: AWI, AWEX, Mecardo

2019-07-12 Wool 1

2019-07-12 Wool 2

2019-07-12 Wool 3

The wool market is now taking the Winter recess over the next three weeks. Buyers were active as they completed delivery orders, lifting the market into a positive finish. Generally, a 10 to 40 cent lift across the individual MPG’s was observed, with the Sydney & Fremantle markets seemingly the strongest.

The Eastern Market Indicator (EMI) was slightly higher on Wednesday but by the close on Thursday had found a 31 cent gain for the week to end at 1754¢/kg clean. The Australian dollar eased again to below US 70 cents closing at US$0.696 on Thursday. This resulted in the EMI in US$ terms to increase by 9 cents to end at 1,222.

The wool market opened at historically high levels in August last year, peaked in September before finding its low point at the end of the season. The EMI opened at 1990, rallied strongly into September to find a peak of 2094, before closing at 1754 this week, close to the low for the season of 1723. Across the season a fall of 11.5%.

In US$ terms, there was a similar patter, with the difference compared to the start of the season a decline of 16.4%.

34,080 bales were offered at Sydney, Melbourne & Fremantle, almost 3,000 more than last week. The pass in rate across the selling centres remained at 6.3% for the week. This meant that 31,923 bales were cleared to the trade, almost 3,000 more than last week.

In the season just completed, the drought impact was felt both in the average merino micron which for July was 18.5 microns, down 0.4 on July 2018. Also impacted was the volume of wool offered for the season. On a monthly average 32,875 bales were cleared to the trade, compared to 39,253 for last season. This represented a 16.5% decline in the total number of bales sold at auction compared to last season.

Crossbreds were amongst the strongest performers across the season, with the 30 MPG up 177 cents or 26%, while Cardings were in severe decline across the season finishing 32% lower.

This week however, the rising tide lifted all boats, Crossbreds were marginally dearer with Cardings also up and quoted in Melbourne improving 50 cents or 5.4%.

A quiet week in the forwards market with only three trades. One trade was dealt in 20 micron wool for August and agreed at 2,000¢. Another trade was dealt in 21 micron wool for September and agreed at 1,975¢. The remaining trade was dealt for 28 micron wool, agreeing at 955¢ for December. Forwards prices are playing yo-yo over the next 6 months or so, a reflection of the physical market of late. Uncertainty is creating market volatility, and it seems like no-one really knows where it’s going to end up. As the new auction season begins and we start to see volumes and quality presented, the forwards market should regain some composure.

The week ahead

We now begin a three-week break. Exporters will take this opportunity to visit customers in the northern hemisphere and look to secure orders for the coming season.

The conversations will revolve around demand from retailers, and projected supply from wool producers, looking to find the match for the opening sales.

We have had reports that retail demand is soft, and we know that supply is at record low levels. Just which factor drives the opening sales is not clear making for another interesting wool market opening.

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Northern MPG
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Southern MPG
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