Australian wool prices record large gains this week

"The strength of competition between just the top four export trading houses proved enough to force 40 to 60ac gains across all wools on offer from the outset of selling," Australian Wool Innovation (AWI) said in its 'Wool Market' report for sale week 18 of the current wool marketing season.

"Auctions are now highly reactionary to immediate demand, both to the positive and negative. Buyers, local and overseas, don’t want a heavily exposed open position and execute purchasing promptly and it appears without price limitations," the report said.

The extent of the price differentials that arose from the first day’s selling compared to the previous closing values had many of the buying fraternity commenting that once again “gains went too high, too fast: not good for stability of demand”. The past three or four weeks of reasonably stable prices of just +/- 20ac had the industry more comfortable whereby both sides of the trade could act with reasonable confidence. The halt to gains and pullback in Fremantle on the final day of selling was the inevitable result as most buyers reverted to price-sensitive purchasing, AWI said.

"There are probably two major reasons why the market is so jittery. One being and financial results of the immediate past. Clearly the supply of not just Australian wool, but global supply is being severely negatively impacted. This is due mainly to adverse climatic conditions. Secondly, some precarious financial impacts would have been incurred by much of the industry due to the rapid devaluation of the wool price that occurred in August. Covering off risk is paramount due to both those factors," AWI said in its analysis on the wool market price trends.

Around 36,000 bales would be on offer for trade at next week's auctions.

Fibre2Fashion News Desk (RKS)