Wool sellers feel the heat
The first sale of the 2018-19 wool selling season brought a correction to the market as demand surrendered to the traditional rise in volume.
It was the largest weekly price fall since August 2012, with the Eastern Market Indicator dipping 62¢ from the previous week to close at 1994¢/kg clean.
By the end of the week, prices had dipped between 50 to 90¢, with some off-style types up to 120¢ cheaper than the previous week.
Woolgrowers looking to sell into the new financial year for tax reasons were part of the 43,880 national bale offering, which resulted in a 15.6 per cent pass-in rate.
Australian Wool Exchange market analyst Lionel Plunkett said price corrections were felt across the entire Merino spectrum, of all types and descriptions.
“It was off-style types, wools with poor additional measurement results and those carrying excessive vegetable mater that were most affected,” he said.
“By the end of the week, prices had generally fallen by 50 to 90¢/ kg, with some off-style types over 120c/kg cheaper.”
Fleece lines finer than 18.5 micron were least affected by the price dip. Wool older than 180 days made up more than a third of the national offering, and almost 57 per cent in WA.
With only this week’s auction to go before the national three-week recess, it will be a wait-and-see approach when the market resumes in August.
The Elders International Wool Report stated that from a technical perspective, the August market would most likely be similar to the 2018 February-to-May period. “During that time, the industry was very comfortable and the price level was considered to be sustainable,” the report said.
“The medium Merino segment will be under the most pressure, while the superfine sector — wools with good test results — will be in demand and expected to go up in price.”
The report said the market would quickly settle down in the spring, but as supply became an issue, prices would tighten up and hopefully slow and consistently move upwards.
“Rarely does the wool market move according to script,” it said. “Commodity prices fell in June, but are still 30 per cent higher than a year ago.”
The report said the US trade spat with Europe and China was a concern for commodity prices.
“German Chancellor Angela Merkel has had to navigate a particularly difficult period in with the far-Right movement gaining ground,” the report said.
The Australian wool auctions will recess from the week beginning July 16, returning in the first week of August.