WITH the currency holding more or less at the levels of the previous week, the price movements were similar in both Australian dollar and US dollar at last week’s sales.
Some A17c and US13c were trimmed from AWEX’s eastern market indicator during the course of auctions across the nation with superfine Merino types easing by up to 40c.
Medium Merino types were less affected and good style lots keenly sought after resulting in overall increases of a few cents.
Crossbreds and cardings also eased by a few cents to finish the auction season in a pretty good space. Given that we have seen more than 500c added to the EMI this season life as a wool grower is looking pretty darn good, if it would only rain a bit more.
Next week sees a larger volume of wools coming onto the market as those who have been waiting for the new financial year offer their produce, but 43,000 bales are unlikely to swamp the market given that early stage processors need to cover their requirements with the impending three week recess occurring in the back half of July.
The market overall continues to slowly ease back after the frenetic activity over the past few weeks and although medium Merino is still in scarce supply and bucking the trend somewhat, the general direction remains down. For those who have been around the industry for a while, having a market easing in June is not a new thing, but for it to be only making baby steps on the way down is certainly a comforting feeling. Often we have seen reductions of 50c or a dollar a week when the market repositions itself, but the lack of quantity available coupled with some pretty steady demand from China, the end of season adjustment so far looks to be very measured.
Larger volume of wools... are unlikely to swamp the market given that early stage processors need to cover their requirements.
- Bruce McLeish, Elders
Demand in China had started to hit the wall, and price resistance was being mentioned here and there, but there are now small quantities being traded again. The price relief of a few cents in the medium merino sector, or more realistically just the fact that prices stopped jumping by 30c and 50c each week has been enough to release a bit of pressure.
Many top makers and carbonisers have been able to fill their order books for the next couple of months during the frenetic sales of the past few weeks and many can no longer offer prompt delivery. This should ensure that most of the early stage production mills are able to continue production without building up stock over the recess period, which is a welcome change to previous years.
Often the trade has returned in August to find early stage processers discounting the market to shift unwanted stock at the same time as greasy wool supplies rise significantly with Australia’s ‘spring flush’ coming onto the market. The number of sales made for the third quarter thus far does not mitigate this entirely, but we are certainly in a much better position than in many of the years past.
One fact that will not go away and is causing a little angst is the performance of the Chinese stock market and also the Chinese currency over the past few days. The tit-for-tat trade war between Washington and Beijing at present is causing some concerns in China and the economic Mandarins are allowing the Chinese currency to devalue. This is making wool purchased in US dollar much more expensive. Not an issue if the final goods are re-exported again, but for the increasing amount of wool now consumed by Chinese individuals that Merino garment has suddenly got a bit dearer.
There is also a bit of concern among Chinese stock holders and as a result of their nervousness about how Chinese companies could be exposed if the trade war heats up they are dumping shares. Should this flow through to consumer activity we may see an unwanted side effect of the Trade skirmish.
Superfine: The basis continues to reduce between the ultrafine/superfine end of town and the medium merino. With seasonal conditions indicating an increased production of finer wools likely this coming season it will probably continue, although with the usual caveat of better style wools v drought affected lots. The basis has now come back to a more reasonable level for the production gurus with 17-micron $5 higher than 21-micron. More than this price difference does make life difficult when delivering to specification, but within test tolerance.
Medium Merino: Still remaining hopelessly short of supply to meet the demand over the next couple of weeks a 30c spread between 19 and 23 micron will only change when supplies increase in August.
Crossbreds: 1000 cents for 28-micron is a big improvement on the same time last year, so not a bad spot to head into the new season.
