Wool market hits record 1500c | Elders

Wool market hits record 1500c


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NEW TERRITORY: Australia's Eastern Market Indicator hits a record 1500c.

NEW TERRITORY: Australia's Eastern Market Indicator hits a record 1500c.

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Australia's Eastern Market Indicator hits a record 1500c.

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THE wool market’s 1500c clean has a nice ring to it – and that was the new record level reached for the Eastern Market Indicator (EMI) last week.

All micron categories benefited from strong buyer appetite and a relatively small offering of only 40,000 bales. The few best style superfine lots available were more than 150c dearer, and in general superfine indicators moved 75c higher than the previous close.

Medium Merino fleece types continued their ‘recovery’ from the 1400’s for 21 micron and closed with the important 21 MPG sitting just over the 1500c level. The few lots of broader Merinos available also finished strongly to add another 60c. The skirting segment could not be ignored in this sort of market activity either and most areas followed the fleece with rises of between 60c and 80c for the week.

Crossbred wools rose a similar amount in percentage terms to the Merino sector (4-5 per cent) and prices were 20-30c higher. Even carding wools are holding new record levels after last week, and stained dusty crutchings are certainly valuable enough to rake up from under the crutching trailer these days.

AWEX’s northern market indicator closed up 52c on 1582c. The 17 micron indicator closed on 2182c, 18 micron 2101c, 19 micron 1880c, 20 micron 1617c, 21 micron 1508, 22 micron 1443c, 28 micron 733c, and 30 micron 574c.

While is it great to have the wool market back at record levels as measured by the EMI and many other individual categories, some are starting to ask where to from here. Individual categories may well in different directions for a time as the market sorts out where it wants to go.

The superfine segment is likely to rise a bit further as the few remaining lots are fought over by buyers with the odd remaining order to complete for the current season. The medium Merino market based around the 21-micron category has returned to the high point on the Australian dollar charts, which has been a resistance level for the past few months. If it does rise above the current 1500c level, it may well rise a lot before running out of steam rather quickly. Conversely it may well hover around this current mark for a while and this would certainly be beneficial in the longer term for prices overall if it were to do so.

The stream did come of the buying fraternity late on Thursday as orders were filled, the increased roster for the coming week was released showing a large increase, and buyer funds became tight. So we may well see a moderation in activity during the coming week for the bulk medium merino types. The Australian dollar has weakened quite significantly since auctions closed last Thursday, and this may mean that prices are maintained in local currency terms, or even rise a few pennies, while prices in US dollar terms may actually ease a little.

There is still a lot of navel gazing occurring in the downstream purchasing departments about whether to continue purchasing at the current levels, or sit back and wait for a correction to occur. Inventory levels in spinner warehouses remain perilously low and many simply cannot afford to wait, but some do have the opportunity to sit and ponder. Supply is certainly not going to assist with their prevarication with Argentina having shorn and sold its entire Merino clip for the season now.

The South African selection at present is nearly devoid of longer fleece types and will move to fortnightly sales within another month. Apart for the larger Australian roster in the coming week of 47,000 bales, a maximum offering in the three Australian centres of 40,000 bales will be the norm from now until the end of the season.

Chinese wool users are well aware of this and the domestic price for tops and yarn is steadily rising in tune with recent rises in the Australian auction price. It is still much too early in the year for the Chinese domestic clip to be harvested, so unless there is a catastrophic event of some sort it is hard to imagine the wool price getting much cheaper in the medium term.

Hindsight always provides wonderful insight, but the economic outlook seems relatively positive at this stage. Mr Trump has yet to create the train wreck many predicted, and in fact Wall Street has risen around 12pc since his election which no doubt feeds through to consumer confidence in the US at least, which is a positive aspect for anyone selling finished product into the worlds largest consumer market.

Sunday, March 5 sees the beginning of the National People’s Congress in China, at which 3000 delegates are asked to ratify decisions made by the leaders of the Party. The economic growth target for 2017 has been further reduced to 6.5pc, after reaching their target of 6.7pc in the past year, which is still very high by world standards. The reduction is necessary in order to reign in out of control lending, mainly from the overheated big city housing market, but also to continue with critical reform of the State Owned Enterprise Sector – read – close down. While it is easy for the western media to be critical and pessimistic about the consumer fallout from such reforms, and the debt numbers that are basically mind boggling, China has shown to have a very steady hand when it comes to managing their economic growth, and thus far, economic transformation. Given the amount of wool being consumed in the Chinese economy of 2017, it will be vitally important for the wool market, that the hand remains steady on the tiller in coming months.

No doubt by the Easter recess the position will be slightly clearer in a number of areas and the forward market for wools of all microns will be a little easier to forecast. At present things are wonderful for every merino grower, and not bad for crossbred woolgrowers. With a little bit of luck and good management we can hopefully set up 2017 to be a year to remember.

- Bruce McLeish is Elders’ northern wool manager.

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