AWI Commentary – wool sale 27 May 2021

Some significant adjustments to Merino price levels occurred this week at the Australian wool auctions.  Unfortunately, it was not all upward but an overall positive atmosphere did prevail. A strange week with some diametrically opposed demand areas which resulted in some very cautious approaches to purchasing Merino wool on one side and aggressive strategies on the other.

This demand was split squarely by micron through the 19micron mark. Crossbreds also struggled to maintain levels.

The Eastern Market Indicator (EMI) inched it’s way upward by 0.4% or 5ac to close the week nominally at 1320ac clean/kg as Melbourne only sold on the final day. When both eastern centres don’t sell, this causes the EMI to go into a nominal basis. The USD EMI was 2ac lower as a result of the weakening AUD:USD forex rate (-0.5%) and 1023usc/lean kg was the closing value. The Western Market Indicator (WMI) lost just 1ac to 1360ac/clean kg. 

Raw supply versus demand economics came to bear this week as growing offerings of the broader micron (19.5 to 23mic) stifled that area and sent prices backwards (-15 to -30ac). A lot of this wool is also carrying vegetable matter (vm) levels above the favoured 1% average that the standard China contract allows. Conversely, the shrinking supply of wools finer than 19micron saw progressively stronger competition as the qualities went finer.

Gains of 20 to 80ac were made, with 17.5mic the preferred type at +80 for the week.

What is a strong lead for the short term outcomes for wool price is the strengthening interest from manufacturers outside of China. The Czech Republic are exercising some of their considerable purchasing ability, while the Indian buyers are increasingly interested, albeit in the face of a very difficult labour situation due to pandemic disruptions in their country. When the wools suit, the Italians are also appearing to be upping their volumes. China remains the dominant force though, but this added competition leads to a healthier and more confident but less predictable trading environment.

A touch over 41,000 bales will be auctioned next week

Source: AWI