Mar 4, 2018 - March at 1782 c/kg clean, a drop of 15c/kg clean since February. Despite ... three months remain in the cu
March 2018
With the Easter recess now with us, wool remains at very competitive levels historically, despite pulling back slightly from the record highs seen over the past two months. The Eastern Market Indicator (EMI) has risen somewhat consistently over the past 5 years, while the past 12 months has seen a very sharp rise in a short amount of time. The fast paced nature of the rise left many in the market “catching their breath” yet with recent week-ending prices during the past month fluctuating, it has many asking whether supply has finally caught up with demand and if the market can find its feet at around this level. Although recent weeks have seen a less consistent and slightly more volatile market relative to recent months, there are some strong indications that the current price levels can be sustained and give a continued positive outlook for the industry. Wool supply for the current season has increased by around 3-5% relative to last year, which theoretically should have kept wool prices at similar levels, however wool prices have continued to climb since last season. The Australian Wool Exchange export results show that an extra 5.3% or 10.1 million kilograms of greasy wool has been sold this season compared to last, indicating that the market’s appetite for wool was not put off by the extra wool and was very quickly consumed by a number of countries including our major buyer, China. The Chinese currently take 74% of our national clip, however this season China has imported a further 8.5 million kilograms, an increase of 6.1% from the previous season. Other changes include a 26.9% increase in wool exported to the Czech Republic who this season has taken an extra 2.2 million kilograms on last season, while India has pulled back 1.6 million kilograms this season. The top 5 export destinations (AWEX): Country
This Season (Kg)
% of clip
Prev Season (Kg)
Change (kg)
Change (%)
China
147,956,433
74.3
139,456,178
8,500,255
6.1
India
10,778,100
5.4
12,464,222
-1.686,122
-13.5
Czech Republic
10,564,321
5.3
8,325,910
2,238,411
26.9
Italy
9,668,325
4.9
9,079,874
588,451
6.5
Korea
7,643,144
3.8
8,529,634
-886,489
-10.4
Wool prices this month have overall remained steady, with the EMI monthly average finishing March at 1782 c/kg clean, a drop of 15c/kg clean since February. Despite this, the individual microns have had mixed results, wools of 17 micron and under continued to climb with 16.5 micron wools averaging more than 3000c/kg clean for the month of March. Wools above 17.5 micron and through to 20 micron have seen a lower adjustment over the month, dropping 30-40 c/kg clean. However impressive gains for microns between 21 micron and 30 micron have been seen in auction rooms across the month, particularly 23-26 micron which gained 70-80c/kg clean each. A possible hindrance to further Merino price gains and an underlying factor to current price volatility is the mixed quality of wools being offered and the ebbs and flows of buyer exporter finance, or lack thereof. Rising vegetable matter (vm) levels, combined with harder to place wools showing high co-efficient of variation hauter (cvh) and high point of break in the middle (pobm) readings are being somewhat neglected and price discounting has become apparent. While these types of wool have been on offer to some extent all season, they are now heading towards the majority of wool volume on offer, and hence exporter parcels requiring target averages of a general 49% cvh and 50poBm are getting harder to hit. Similarly, the most voluminous types sold to overseas first stage manufacturers are 1% vm on average for Merino types. Therefore, with most of the offering in all micron brackets much higher than this on average across the weekly offerings, some significant discounting has appeared for readings above the 1% vm level on individual sale lots. Pressure on buyer exporter finances are rather self-explanatory, with the 20% approximate price gains of the past 12 months becoming a handbrake on buyers’ ability to both sell more or even the same amount of wool. Also, the cash to carry any significant stock in their inventory remains in short supply, hampering a lot of buy / sell opportunities that may present themselves on an ad hoc basis. Despite all these considerations, three months remain in the current selling season and with much wool still to be sold, the usual powers of supply and demand will determine where the market heads. With recent export data and supply levels pointing in a positive direction for the woolgrower, the remaining three months will hopefully bring good results.
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