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WEEKLY MARKET REPORT Week Ending 22nd March, 2019 AWEX Northern Micron Indices Comparison
CROSSBREDS SOLID - MERINOS FALL! Another week and more falls for the wool market. For the 4th sale in a row the market was in retreat as all of the advances of S34 (59 cents) amidst the SA foot and mouth outbreak have been eroded as the AWEX EMI lost another 16 cents to add to the 48 cent losses for the 3 previous sales. The only sector to escape any losses was XBs. The ascending A$, peaking at 71.5 cents, a lift of 1.22% coupled with the ongoing poor selection gave buyers enough ammunition to let the market drift as 18 micron and broader gave up 10/15 cents while < 18s fell by 25 cents with only the very best style fleece wools with high nk/t readings and low mid-breaks escaping any discounts. The fleece offering that came under a style 6 or 7 (average to inferior topmaking styles) made up 15% of the volume, the highest weekly level since June 2010 as the grip of drought seems to tighten up. Most room 2 types fared worse than their merino fleece counterparts. Skirtings took hits of 30/50 cents for the low VM lots (<2%) with burrier, poorer style types giving back 80 cents. Cardings also took a major hit as LKS/STN lost 40 to 70 cents while STN collapsed by 10 to 120 cents. As mentioned earlier, the XB sector was the only one to go through the sale unscathed as most microns were solid to 20 cents dearer. All the talk on the showfloor centres around the selection and how poor it is with no real improvement in the short term even if the drought were to break now. Some fleece lines are yielding below 50% with these becoming an issue in scouring as water replacement frequency increases and sludge disposal costs escalate. There are no issues further down the processing line if scouring is effective as topmakers can use these wools and take advantage of the price discounts as the finished product is still suitable for worsted yarn manufactures. National volumes look to have stagnated around the 40,000 bale/week mark as many growers shear and offload sheep to escape what could be another tough winter as low finances and ability to source supplement feed is forcing growers into this dire situation of selling ewes. Quantities are expected to decrease rapidly after Easter. The market looks to be close to the bottom of this price cycle according to some buyers. Let’s hope so and pray that “Trevor & Veronica” can get together and deliver what so many desperately need - a massive rain event!! Ag Concepts Fwd Prices as at 22 March 2019
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Weekly Market Reports
22 March 2019
15 March 2019
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WEEKLY MARKET REPORT Week Ending 15th March, 2019 AWEX Northern Micron Indices Comparison
UNDER THE WEIGHT OF DUST! It was another tough week as the EMI slipped for the third week in a row under the weight of an increasing catalogue of drought-affected dusty wools and back under the magical 2000 cent mark to finish 29 cents lower at 1979. The national average yield on merino fleece this week was 63.6%, the lowest in ten years. Over the course of the week buyers continually adjusted downwards their limits on the low yielding types as they struggled to average them into their orders. On the other hand, the few well-measured lines for both yield and tensile strength saw very good competition and finished the week not far below the previous week. It seems this trend will continue for the foreseeable future and now is certainly the time to be pulling dusty backs out of fleeces to give the remainder a fighting chance. What is also set to continue will be the downward pressure on the sub 19 micron sector and we now see the 17 micron indices 186 cents below this time last year even though the EMI is 228 cents above last year’s level. We predict the gap to narrow over the coming months with an imbalance in offering squeezing the broader end and flooding the fine end. The Foot and Mouth outbreak in South Africa could still be having an impact here but not positive. We did see a jump in the market three or four weeks back and some of that rise was attributable to the Chinese ban on SA wools. The downside is that there are exporters who have South African wool tied up in containers either at Chinese ports, on the water or still in SA awaiting a clearance, who also buy wool off us. These exporters (a couple of large ones) would be feeling a credit squeeze and this has the potential to impact our market here. South Africa produces about 50mkg per annum equivalent to about 14% of the Australian clip. The fall in production here this year will be close to the entire SA wool clip. Next week a larger catalogue of 44,000 bales will be offered in three centres with Macwool to offer 760 bales on Wednesday. I think you might have gathered by now we expect a similar trend for next week. Ag Concepts Fwd Prices as at 15 March 2019
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8 March 2019
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WEEKLY MARKET REPORT Week Ending 8th March, 2019 AWEX Northern Micron Indices Comparison
STEADY AS SHE GOES! Another steady week for the wool market as the AWEX EMI had a small decline of 8 cents to 2008. In Fremantle it was a reversal of the last series as it virtually gave up all the gains of the previous sale to fall by 20 cents to 2157. The volume of dusty, tender, fine fleece types weighed on the indicators as the lots with better specs, that were few in number, were rock solid but couldn’t compete with the inferior types as they pushed the fine indicators < 18.5 down by just 5 cents while the 19s and broader retreated by 15/20 cents with some of the poorer style wools quoted 30 to 60 cents cheaper as buyers struggle to fit the vast number of these drought affected wools into orders. Skirtings followed the lead of their fleece counterparts to see prices reduce by 10 to 20 cents across all microns and VM levels. Cardings continued their price rises after last series’ hiccup to have the 3 centres average a 30 cent increase for the MCI, now 91 cents higher (1237) than their pre-Christmas close. Crossbreds kept their stellar run going as most types added 10 to 30 cents to their previous record breaking levels. Despite the FRX going in favour of the A$ by 1 cent to 70.50 it was not enough to stop the market from falling. Although demand remains high and supply is dwindling the quality of the offering is a hindrance to any price advancement at the moment with the selection not improving any time soon. ABARES held its annual Outlook Conference in Canberra this week releasing its new 5 year forecast for agricultural industries. The new forecast for wool looks confusing and inconsistent which is not providing the correct information for the industry. They are forecasting that total wool production for 2018/19 will be 383mkg (2.1 million bales) a 9% fall from the previous season. This is in line with AWTA testing data that is 11% less than last season up till the end of February. The Chinese ban on wool imports from SA continues as a delegation from there is in China to try and bring a quick resolution to the stand-off but it could take up to 2/3 months. This didn’t hinder their market (up by 2% this week) with the big Chinese processor, Tianyu, securing 1600 bales. Our national catalogue drops back to 41,700 bales next week; we offer 760 bales on Thursday hopefully to a dearer market.
Ag Concepts Fwd Prices as at 8 March 2019
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1 March 2019
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WEEKLY MARKET REPORT Week Ending 1st March, 2019 AWEX Northern Micron Indices Comparison
THINGS BACK TO NORMAL?? An 8 sale run of rises for the EMI came to a halt this week as the market drifted by 11 cents to 2016, the best start to the year since 2006. With Chinese mills not operating in South Africa and their decision to hold wool sales this week and our local volume lifting by 8,500 bales in the space of 4 days due to last sale’s big gains many theories were being touted as to what might happen. Could the market lose 10/15% in SA and our market following suit here with the European orders heading across the Indian Ocean to what may have been a substantially cheaper market or stay here to support our market?? When will the Chinese resume buying in SA? Growers and brokers were understandably worried about this week’s outcome on both sides of the Indian Ocean. The market held up well as a cheaper opening trend led to a stronger finish to see 18.5s and finer up to 10 cents cheaper while broader microns gave back 25 to 35 cents. It was interesting to note Fremantle had both days of increases. Merino skirtings had a solid sale to finish in sellers’ favour. Crossbreds had a mixed week as the finer and very broad types gained 20 cents while 28/30micron lost 10 cents. Cardings gave up 10 to 15 cents for most types in this sector. The market in SA was nowhere near as bad as predicted, just a 0.6% fall and, worthy of note, the big top-maker from China (Tianyu) bought 1700 bales this week, headed to who knows where!! Considering the events over the past few weeks global wool markets looked to have dodged a bullet. The suspension of sales in SA and the embargo from Chinese Customs on their wool imports could have led to a massive fall in their market with the potential repercussions felt here as buyers chased the potentially cheaper wool in SA. This didn’t eventuate as the good selection of finer types were in good demand from Europe. In no real surprise to anyone the release of testing figures for February from AWTA was down 5.5% from the previous season’s weight of wool tested. This has the year-on-year decline at 11.2%; auction offerings are at 13.4% lower than last season (174,000 bales) or 4/5 selling weeks. We sell late on Wednesday next week as the national volume drops slightly to 46,000 bales. Market direction is still hard to pick but plenty of business was written on Wednesday night that didn’t really flow through to the sale room on Thursday - hopefully next week.
Ag Concepts Fwd Prices as at 1 March 2019
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22 February 2019
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WEEKLY MARKET REPORT Week Ending 22nd February, 2019 AWEX Northern Micron Indices Comparison
A DRAMATIC WEEK! A dramatic week for wool sales globally as South Africa suspended this week’s sale because of the import suspension of their greasy wool to China due to the Foot and Mouth outbreak in January. This led to a major price lift in our market as purchasing orders in SA shifted east across the Indian Ocean to Australia resulting in the AWEX EMI jumping by 59 cents to crash through the 2000 cent barrier to 2027. In US$ terms the rise was just as significant, 50 cents to 1451 as the FRX was stronger trading 71.5 to 72 cents. All fleece types had good gains, 19 micron and broader the best performers, up by 80 to 100 cents while < 19 gained 35 to 50 cents. Skirtings sold to a dearer trend to the tune of 40 to 80 cents depending on type, micron and VM %. Cardings also continued on their merry way as the 3 centres averaged a 33 cent climb with all types in this sector up by 20/40 cents. Crossbreds were also caught up in the buying frenzy; most microns were 40 to 75 cents to the good. One of our XB clips averaged 670 cents/kg to gross $1212/bale (FLC, SKTS and LMS). Even though the FMD outbreak occurred in the remote north in a cattle herd far from any sheep, the suspension of wool sales came out of left field with no consultation with growers. The market was tipped to be dearer here but with the SA decision panic set in and our market took off. Over-reaction?? Maybe, as SA produce about 250,000 bales of wool/year, 2% of global wool production and 6% of merino, almost entirely < 22 micron with 68% exported to China. A meeting between Cape Wools, the governing body, wool buyers and wool grower bodies have decided to hold next week’s sale but almost certainly without Chinese mills operating. SA wool buyers have warned of a sharp fall in their market next week given the reduced saleroom competition. The extent of the drought can be seen in the latest export figures to December 2018. Australian wool exports are back by 18% when compared to the previous season with SA down by 17% and NZ, Argentina and Uruguay all falling by 5 to 7%. As a result our major importing countries are down on their volume of wool: China and Czech Republic by 20%, Italy 14% and India 5% but Germany up by a whopping 66%. Next week sees increased volume for sale here with 49,700 bales (up from 41,300 on Monday) as growers rush wool onto the market and in SA this sale’s cancelled offering and next week’s quantity has Chinese processors worried that their ability to absorb the elevated volume will be tested even though they may not buy a bale in SA. Ag Concepts Fwd Prices as at 22 February 2019
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15 February 2019
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WEEKLY MARKET REPORT Week Ending 15th February, 2019 AWEX Northern Micron Indices Comparison
CROSSBREDS BREAK NEW GROUND!
The gradual increases continued this week as the AWEX EMI ascended by 24 cents to 1968. This rise saw the Sydney indicator break through the 2000 cent mark to finish the series at 2011. This week’s rise was the 7th straight sale that the EMI has moved higher, adding 107 cents since sales resumed in January. The medium microns (19 to 22s) were the notable performers, gaining 10 to 25 cents while the sub 18.5s added 5 to 10 cents. The stable FRX helped the market as the EMI in US$ terms lifted by 21 cents to 1401. Skirtings had an excellent sale as all types were quoted 30 to 50 cents higher. The 3 week run of falls was halted in the carding sector as rises of 15/20 cents for STN/CRT and 30 to 40 cents for LKS had the 3 regional MCIs average 25 cent gains. The highlight of the sale was the record breaking crossbred sector as gains of up to 50 cents has the 28 and 30 micron indicators in an all time record territory at 1080 (1103 in Melbourne) and 928 respectively. Recording of these indicators goes back to the days of the AWC market reporting that commenced in 1979, 40 years ago. Melbourne hosted a “Tasmanian origin” sale this series the largest weekly offering of wool from the Apple Isle for 2 years. The superior selection was met with strong competition dominated by Italy to see some lots up to 150 cents higher than their indicators but still have the MPGs in Melbourne < 18.5 averaging 44 cents lower than Sydney. On the flipside of quantity, Sydney’s fleece offering on Thursday was the smallest in 12 months and the weekly total is the least in 5 years as national yearly offerings are 179,000 bales (14.8%) lower than last season. Even though global wool supply is expected to decline by 12% this season, most mills are reportedly looking to restocking greasy wool for the Autumn/Winter Northern Hemisphere season. Global events that were thought to have an adverse effect on prices have not yet impacted as textile and apparel goods exported from China had a 3.5% increase in 2018. Retail figures from the US show the worst consolidated sales in 10 years for clothing - a worrying stat as 14% of our wool ends up in the US. Will the market rise for the 8th straight week? Time will tell! Ag Concepts Fwd Prices as at 15 February 2019
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8 February 2019
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WEEKLY MARKET REPORT Week Ending 8th February, 2019 AWEX Northern Micron Indices Comparison
BIG VOLUMES, CHINESE NEW YEAR, NO PROBLEM! Sellers in this sale were nervous about offering wool as our biggest customer celebrated their Chinese New Year. The China Australia working group Chinese representative had made a request on behalf of mills in China to consider a sale recess for this celebration but was denied due to a disruption of the orderly trading of wool so soon after the 3 week Christmas recess. There were no repercussions from China as a solid start on the opening day led to more vigorous bidding on the final day as the AWEX EMI added 10 cents to its previous value to sit at 1944 cents. This was the 1st designated super-fine sale of the year and buyers were impressed by the superior selection on offer to push the 18 micron MPG and finer ahead by 60 to 80 cents and more for some specially selected types. Broader microns than 18s gained 10 to 20 cents. The weaker A$ against the US$ by 2.33% certainly helped the market this week. Skirtings had a solid sale as no real movement in either direction was evident except for the very stylish types that attracted premiums of up to 50 cents. Crossbreds took a breather from their meteoric rises since Christmas to lift by 10 to 40 cents. Cardings also took on a steady approach as again LKS cheapened by 20/30 cents in the opening session then steadied on the final day as the Fremantle carding market gained 10 to 25 cents on Thursday to maybe steady this sector. Since the market opened with a bang 5 weeks ago, the market has flat-lined, operating in a 34 cents band (1910 to 1944). Concerns over the large volumes in the 2 opening sales and Chinese new year had most sellers worried but we look to have weathered that storm this sale as weekly quantities are now firmly entrenched in the mid to high 30,000s for the foreseeable future. All participants, from growers to cloth finishers, are very aware of the supply shortfall of merino wool by about 15% due to the mother of all droughts in eastern Australia and spreading to South Africa. As a result global wool textile manufacturing is set to decline by a similar % over the next few months as demand is steady and China’s slowing growth, the Brexit debacle and the US/China tariff wars could stagger any price rises into the future despite demand still being okay and supply dwindling. Ag Concepts Fwd Prices as at 8 February 2019
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1 February 2019
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WEEKLY MARKET REPORT Week Ending 1st February, 2019 AWEX Northern Micron Indices Comparison
HAPPY CHINESE NEW YEAR … HOPEFULLY! The wool market plodded along this week with mixed results in all 3 centres as national weekly offerings are now averaging 40,000 bales following on from the 2 big opening sales of the new year. The AWEX EMI pushed ahead by 7 cents to 1934 with most microns moving by single figures either way in Sydney. In US$ terms the EMI added 33 cents to 1405, this due the rising A$ as the sale progressed, up by 1.5 cents (2.2%) for the week. With the volume of drought affected wool increasing each sale only the long, low VM higher yielding types are immune from any major price discount. Buyers are finding it harder to place the burrier, tender, short and sub 60% yielding fleece types and are adjusting prices accordingly as only the best types attract solid premiums. Skirtings also improved by modest margins - 10 to 20 cents for most types bar the very high VM lots. Again LKS weighed heavily on the carding sector as < 17 micron types were reduced by 30/50 cents with STN giving up 20 to 30 cents. The best performing of all sectors were the XBs. After an excellent opening 2 sales they were in hot demand again as finer than 26 micron added up to 50 cents while 28/30s climbed by 100 cents as some exporters are blending these with fine wools - the reason for the renewed interest as 28 micron is at a 5 year peak. The 2 fundamentals that remain in place (supply and demand) will dictate above all which way the market goes but we do face some headwinds. The market looks to be coping with the FRX fluctuations as this sale demonstrated although new forward business is hard to come by at current market levels given the quality of wool on offer as processors try to balance the need to keep machinery running and the inability to pass the current price levels to downstream customers. Some overseas manufacturers are looking to other sources to continue processing but the move to blending XBs with merino rather than a shift to blend synthetics is working thus far. The ongoing US/China trade war, the messy Brexit in Europe and the slowing Chinese economy could all play their part at some stage on wool prices. AWTA reports that 12% less wool was tested in January 2019 compared to the same month last year and wool sold year to year is 19% (201,000) lower than last season to date. As we approach Chinese New Year, most pundits forecast good types to hold while off style wools could struggle. Ag Concepts Fwd Prices as at 1 February 2019
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25 January 2019
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WEEKLY MARKET REPORT Week Ending 25th January, 2019 AWEX Northern Micron Indices Comparison
LESS WOOL, LITTLE RAIN, MORE DUST Last week’s predictions of a stronger market were spot on in most categories, particularly in the Northern market as all merino fleece micron indicators posted reasonable gains. The crossbred sector along with cardings showed some resistance - not really that surprising as 26 micron surged 134 cents in the preceding two weeks. Some analysts are saying that the Chinese are struggling to keep machinery running, some at 50% operation and are buying crossbred wool because it is cheaper hoping to sell it in blended form to keep the doors open. Seasonally, China has fallen from 76% to 71% of the offering; India has edged up to 7% with Italy 6% and Czech Republic (Modiano) with 4%. I know we talk about lower offerings most weeks but the further we go this season the more this plays out and there is constant speculation about how the market will react as it continues to decline. One reaction we are seeing as the year unfolds is the competition on well-measured wool (particularly lower VM types) and who is buying them. In the last few weeks we have seen some well grown western division clips with good length (80-90mm) and high NKT receiving very strong competition and from buyers like New England Wool (Barberis and Reda) who normally focus on more traditional fine wool types. Many of the typical fine wools are a lot finer than normal and many under 35 NKT with high mid-breaks. Removing burry hind legs and keeping the fleece portion as low as possible is a real winner this season, if you can get it under 2%. The other feature worth noting this season is the increasing premiums for non-mulesed wool. It’s been a long time coming but non-mulesed lines which also carry other favourable specs have been attracting greater competition from a wider audience of buyers. The other factor with these wools is that more and more of them are contracted forward so they don’t figure in the most recent price analysis. Next week nationally 40,629 bales will be offered with just 8,929 to be offered in Sydney. Macwool will offer 746 bales on Thursday. Have a good hot Australia Day weekend!
Ag Concepts Fwd Prices as at 25 January 2019
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18 January 2019
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WEEKLY MARKET REPORT Week Ending 18th January, 2019 AWEX Northern Micron Indices Comparison
BUYERS ABSORB BIG VOLUME! Despite the largest national offering of the season to date (51,700 bales) the market absorbed the excess volume easier than most pundits thought. As far as the merino fleece sector was concerned, it was a sale of contrasts as finer types <18.5 fell by 10 to 35 cents due mainly to the sub-standard quality of the offering feeling the effects of the drought, bar the lots with the “right specs” that were 25 to 120 cents dearer than their indicators. The 19s and coarser improved by 10 to 25 cents. The AWEX EMI gained 13 cents to 1923 helped along by the rises in fine XBs and merino cardings and skirtings. Skirtings had a solid sale as all types and descriptions were 10 to 20 cents to the good. Cardings kept their momentum going from last sale as all types added 15 to 30 cents to their previous values to put the MCI in Sydney at 1202 cents. Crossbreds also had another stellar sale to follow on from last series as 28s and finer climbed by 50/80 cents. Speculation of supply concerns is all the talk on the showfloor, too much in these opening 2 sales and a sharp decline for the next 4 weeks. As we stand at the present time there has been 175,000 bales less offered than the same time last season, a 17% decline or about 4 sales!! A telling factor of the 2 sales since the new year was the re-emerging of one of the bigger local trading companies taking on the Chinese indent buyers to see price levels in the medium types benefit from an increase in competition as price determination in the finer sector is now truly driven by poor quality and a rise in volume due to the drought. The fine XB sector (25 to 28 micron) has had the largest increases of any type recently, 100 cents. The main reason is Australia is still the primary source of “good white” wools in this category and mills can keep combing machinery running at similar settings to full length merino fleece types. At the other end of the market carding wools look to be back in favour as well. European retailers are reporting improving winter sales after a slow start to the season. Hopefully the recent blast of cold weather can keep sales ticking along. Next week has quantities falling back to 41,000 bales with all the talk being a solid to dearer market. Ag Concepts Fwd Prices as at 18 January 2019
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