The Australian wool market has set a new national record this week with the Eastern Market Indicator soaring to 1431 cents a kilogram clean.
On the back of frenzied buying for finer wools in Melbourne on Tuesday, the EMI climbed six cents higher than the previous record of 1425c/kg clean which was set in June 2011.
The EMI in US dollars also cracked the previous high price by 10c to finish on Tuesday at 1071c/kg.
Following the recent three-week Christmas break, wool markets resumed to roaring demand which has resulted in a 76 cent jump and a new national record price.
All three selling regions have trumped previous Merino carding price records with the southern market indicator 323c/kg higher than 2011.
Attention on Merino fleece has ignited the new year markets with most microns gaining more than 100c/kg.
Australian Merino Exports director Chris Kelly said while prices were like 2011’s, the market dynamics were dramatically different.
Last week the volume of fine wool compared to other breeds was 71.7 per cent, a low point for the season.
In 2011, the double-faced fabric trend was developing and flared prices for medium micron wools, while drought conditions caused an oversupply of fine wool.
Since then, lower prices for fine wool has seen an exodus of producers and heavily contracted supply at a time when the finer fibre is returning to popularity.
“After several years of fine woolgrowers exiting the industry, now the last man standing will do well out of this,” Mr Kelly said
“Fine woolgrowers that held in there should see a good time ahead.”
Mr Kelly said there had been a change of demand and requirements with customers wanting “finer, lighter, softer” wool.
“We are seeing limited offering of that finer micron and it seems growers have taken the prices prior to Christmas so we are sitting here mid-January and we are not seeing the fine wool volumes we traditionally would,” he said.
“Overseas customers want it and need it, so supply and demand is hitting home.
“The wet conditions have increased the Vegetable Matter (VM) in wool and that is only going to get higher so sourcing the specifications customers want is becoming difficult.”
Prices for 17-18m wool remain back about 300c/kg on the record high prices of 2011, while the medium to broader micron which is bulk of the nation’s clip is on par.
While the ultrafine market remains 652c/kg behind the 2011 highs, it is the 15-18m range that has received the most competition and gains.
During the recess, the US exchange rate dropped 72c before recovering to last week’s closing level of US74.62c.
Mr Kelly said was the market was driven by concerns over fine wool supply rather than currency fluctuations.
“The current prices have caught a lot of people by surprise so some customers would like it to be cheaper,” he said. “The current currency conversions are still quite attractive.”
Unlike 2011, where the dramatic rise was met with a dramatic fall, Mr Kelly said the current market could be sustained.
“There is still pain from over the years when spikes come as quickly as they go so producers won’t turn their production around quickly unless it is sustained for six to 12 months,” he said.
Whether the demand would excel prices to a new record high, Mr Kelly believed it was not out of reach.
“I don’t think prices will be as racy as they were last week,” he said.
“We expect the selection will turn dramatically and become inferior with burr and tender wool which could pull the indicator back or show that there is still more in it in a month’s time.
“It is an exciting market but we are weary of the quick rises because it can be a difficult period to trade if you’re on the wrong side.”
Australian Wool Exchange (AWEX) data shows 67,000 more bales hit the market for the first six months of this season, of which half the extra bales flooded December auctions.
“It was a strong market so that would have flushed some wool out of storage, as well as shearing delays which were catching up,” AWEX senior market analyst Lionel Plunkett said.
“It will be interesting to see whether there will be any buying resistance because last year 1500c/kg, on 21m, was a sticking point and we are approaching that now.
“In 2011, the market got to 1531c/kg for 21m before it came off the boil.”
Annabelle Cleeland
Annabelle Cleeland is Fairfax Media’s national sheep and wool writer. Annabelle joined the Fairfax team in 2012 to nurture her love of Australian agriculture. She began as the Victorian western district reporter at Stock & Land before taking on a senior position as a journalist reporting on all industries statewide. Annabelle’s appetite to report on issues which affect the sheep and wool industry has seen her travel to many parts of Australia and abroad. She is excited to spin industry yarns during a period of substantial demand for the sheepmeat and wool industries. Annabelle enjoys horse riding and climbing mountains, and is a lazy supporter of the Geelong Football Club.
Annabelle Cleeland is Fairfax Media’s national sheep and wool writer. Annabelle joined the Fairfax team in 2012 to nurture her love of Australian agriculture. She began as the Victorian western district reporter at Stock & Land before taking on a senior position as a journalist reporting on all industries statewide. Annabelle’s appetite to report on issues which affect the sheep and wool industry has seen her travel to many parts of Australia and abroad. She is excited to spin industry yarns during a period of substantial demand for the sheepmeat and wool industries. Annabelle enjoys horse riding and climbing mountains, and is a lazy supporter of the Geelong Football Club.
