Wool on a surge

Tasmanian Country - - NEWS - Rob Calvert Rob Calvert is Roberts’ wool rep­re­sen­ta­tive

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.

For any en­quiries email rcalvert@robert­sltd.com.au.

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