Merino wool movements during the week were all to the negative with the superfine sector most affected. The fall in prices for wool finer than 18.5 micron was exacerbated by diminishing quality and losses of 50 to 60ac were recorded. The fine and medium wools held on better with prices 20 to 30ac lower. The skirting segment behaved similarly but the cardings and crossbred wools performed the best with 10 to 15ac lost and a large portion of that due mainly to the stronger and disadvantageous USD v AUD rates.
“Merino wools of all types and descriptions were allowed to drift backwards from the outset by buyers, but the under-current of swelling demand became evident towards the close of selling and arrested the slide on quite a few of the type sectors,” Australian Wool Innovation (AWI) said in its ‘Wool Market’ weekly report.
“The foreign exchange rates on all of the major currencies didn’t really stimulate overseas buyers to move trade sentiment to the positive either. Those rates all appreciated against the Australian dollar (AUD) by varying degrees of between 0.4 per cent and 0.8 per cent. As such, the EMI when expressed in US dollars was far less affected and drifted 13usc lower or 0.9 per cent lower to 1379usc/clean kg,” the report said.
After a few weeks of going against the trend of most other currencies moving up against the AUD, the euro finally succumbed and joined that trend and recorded the strongest movement. For buyers using this currency, this dulled the AUD falls and eliminated most of the advantages of the weaker auction prices. This remains probably theoretical only though, as buyers reported a high percentage of the wool on offer was not suitable to this market due to quality factor.
The factors hampering wool markets at present remain similar to the past few weeks since Chinese New Year break put the skids under the market. The high prices and finance access issues, combined with the reduction in quality of wool on offer are predominant factors affecting the market. Additionally, it seems having the major buyer of wool globally basically out of action for a week whilst wool auctions forged ahead regardless probably didn’t help either, AWI said.
Access to finance is an issue that all would understand. Put simply, it takes twice as much today to fill the same order for the same type it did eight years ago. Also, with wool prices being considered on the high side at present, this usually prevents local buyers stepping in to stock wool whilst waiting for clearer demand signals from their clients. Essentially this means too much risk for very little reward for the buyer exporters, explains the report.
Conversely, the sellers are happy to continue to sell and take current prices on offer and hence the sliding market. So, whilst demand is still there, and supply is okay, this lull is typical of spot markets reacting to the immediate hand-to-mouth demand situation that the wool market has been operating for years now, it adds.
For sale week 38, around 39,000 bales is rostered for auction in Australia. A firming tendency in prices on the better wools and a lift in buying intent from exporters witnessed at the close this week just may signal a slowing in the fall, says AWI. (RKS)
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