Wool on a surge
WOOL’S wondrous rise continues to break records with the benchmark Eastern Market Indicator reaching a peak of 1623c/kg last week.
This represented an increase of 45c/kg on the previous week, with fine microns achieving significantly better gains.
The EMI has risen 320c/kg or 25 per cent in the past 12 months Last week was just the second time the EMI has topped the magical 1600c/kg mark after it reached 1614c/kg in August.
The Merino cardings indicator also reached a new high last week, trading at 1300c/kg.
Experts say increased demand from processing powerhouse China, along with consumer appetites turning towards natural fibres, have pushed domestic wool prices skywards.
Every micron indicator across all selling centres rose, with gains from 2c/kg for 32micron wool to 81c/kg for 17micron wool in Melbourne.
The rise has not deterred international demand, with Australian wool export volumes rising 6.7 per cent for the first three months of the 2017-2018 selling season.
National Australian Bank agribusiness economist Phin Ziebell said fine and superfine wool remained at a “substantial premium”.
The 17-micron indicator in Melbourne is up 753c/kg year on year.
“The somewhat lower Australian dollar, to which the wool industry is usually very sensitive, has probably helped in the last month,” Mr Ziebell said.
“Still, it is unclear whether prices are sustainable at their current levels. While we see good signs in the form of very strong Chinese demand, this is not guaranteed to continue.”
Australia produced 339 million kilos of wool last year, compared with about a billion kilograms in the late 1980s.
Australian Council of Wool Exporters and Processors president Matthew Hand said that figure outstripped global demand at the time, and there were now new elements driving demand.
“One key point is consumer appetite has moved distinctly in favour of natural fibres, with health, sustainability and ethical practices leading the way.
“Consumers know what they want and wool is certainly much higher on the shopping list today than it has been for many years.”
Independent analyst Robert Herrmann, managing director at Mercado, said wool prices were at a level where predictions were a “guessing game”.
“Will buyers (or more importantly their customer processors overseas) pull back from this rally and to see the market retrace, or is this rally unstoppable and further increases are imminent?”
Mr Herrmann said growers should continue to sell as soon as wool is tested and consider forward prices.
IT has been another outstanding week for all sectors of the wool market.
We have continued a run of six straight weeks of gains in the market and reached record-breaking levels in some areas in the past fortnight.
There were 43, 000 bales offered for sale in all three centers on Wednesday and Thursday and despite the fact the market volume continues to track up 11 per cent compared to last year we are still reaching new highs.
The benchmark Eastern Market Indicator surged to 1656c/kg at the close on Wednesday, and within that basket of types there were plenty of other records set.
For example, the 19.5-micron category was at 1870c/kg, the highest level since recording began in 2001.
Cardings have gained the best part of 100c clean in the past fortnight to break through 1300c/kg for the first time ever.
To put that into perspective, a long-term benchmark for 21.0 micron fleece has been 1200c/kg clean and that category closed at 1630c/kg clean on Wednesday.
There is also something for crossbred producers to smile about with all micron categories rising about 5 per cent on Wednesday this week. The 28.0 micron types are now tantalisingly close to the 800c/kg clean mark again. Encouragingly for the very broad crossbreds, 32.0s were up about 7 per cent to 430c/kg clean.
So who’s buying at these levels? Many of us are familiar with Techwool, which has been Australia’s largest exporter since the demise of the large corporates.
The business has had some changes of trading staff recently, but it doesn’t appear to have slowed it down. It swallowed a massive 3500 bales on Wednesday alone this week – well over $7.5 million spent in about four hours.
Obviously, it takes more than one exporter to drive a market and it was interesting to see Modiano, which rarely features in the top three, to buy 2500 bales or 11 per cent of the daily offering.
We are certainly in unchartered territory now with many saying they thought the market “toppy” last week, but it continued the rally this week.
As we’ve said previously we expect weekly volumes to be below par in coming months, putting on supply pressure which is a positive.
Next week volumes increase to close to 50,000 bales nationally with Melbourne upgraded to a three-day sale.
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