All correct and back on track

MOST of the wool price rise was currency related but with all the other fuel and fertiliser price increases currently making life more difficult on the land a favourable currency rate for those selling wool this week was very welcome. 

With such a favourable currency rate exporters were over-run with inquiries and were able to sell freely until some had to slam the bag for fear of not being able to buy enough wool the next day.  

The overall market indicator, the AWEX EMI increased by 20 cents, although drilling down to a more relevant 19-micron price saw a price increase of 30-40 cents in the east, and 70 cents in the western market in local currency terms. 

In USD the EMI actually decreased by seven cents for the day.  Similarly in Euro terms the increase was a more benign five cents, although the wools which most European mills purchased either in greasy form or as wooltop saw an increase of 30 Euro cents.

On Wednesday following the overnight sales the indent operators in particular stepped on the gas and outmuscled the larger topmakers to dominate proceedings.  

A further 42 cents was added to the EMI in local currency terms, and the strength of the market was very clear with the USD price also rising by 39 cents for the day.  

Again the 19-micron MPG reflected the true market tone as it rose by 99 cents in Sydney, 53 cents in Melbourne and 44 cents in Fremantle.  

All of the merino indicators from 16.5 through to 21-micron rose strongly as buyers scrambled to fill orders and make sure that nothing was left uncovered over the Easter recess.  Crossbred wools were a touch dearer but the week was all about merino as perhaps it should always be.

So the correction which everyone agreed was warranted and necessary to allow a bit more correlation between greasy wool prices and wooltop or yarn prices seemed to settle around the 25 per cent of the original price increase since October last year.  

A lack of supply will be in the forefront of everyone’s minds after the trade returns from the Easter break.  Only the brave will sell wool they do not already have in stock until auctions restart on April 14.  

The vast majority of hold wools and grower stocks are now exhausted and fresh wools coming into broker stores are not huge.  

AWTA figures for the month of March show season-to-date testing and therefore indicative production is still 10 per cent below last year, and more or less 20 per cent below the five-year average.  

Speculation on the showfloor is that both Sydney and Melbourne will be reduced to one-day sales at some point in May as quantities dry up further.

South African supplies are limited and South American producers are still a few months away from shearing the next clip.

The northern hemisphere shearing season is normally starting to crank up in May and June but it will take a couple of months for this greasy wool to reach the processing facilities in China – perhaps a little longer this year from Europe with the indirect shipping routes now being used. 

So the early-stage processing fraternity in China is beginning to sweat a little as the squeeze on supply is becoming more critical.

Now that the correction has run its course the fence sitters are all clambering down again and trying to get some of last week’s prices.  

Demand is not booming in China and there have been many tough conversations with retailers and brand wholesalers about the increased prices this year.  

There is a lot of thought being given to noble fibre blends this season as the garments lend themselves to a different price point but the merino must also be of the highest quality to enhance rather than detract from the fibre amalgamation which is adding to the price pressure at the quality end.

So, after the correction we are now ‘back on track’ and although there is still some pain when mills try to sell fabric and garments at this price level not many believe that the wool market will fall.  As things settle down in the Middle East and the global economy rebuilds the next couple of months in wool world should be fairly exciting.