WEEKLY MARKET REPORT 

Week Ending 28th June, 2019

 AWEX Northern Micron Indices Comparison

SEASON ENDS ON A SOUR NOTE!

Hopes of a solid market faded early in the week as futures were traded as much as 50 cents lower than the spot price indicating yet another bad sale ahead. Both days had similar losses to see the AWEX EMI collapse by 51 cents to 1715, now at its lowest point since December 2017. The worst performing microns were 18.5 and finer that fell by an average of 100 cents while broader MPGs gave up another 80/90 cents as 25% of the national fleece catalogue was passed-in with low yielding, tender types 150 to 200 cents cheaper than their superior counterparts, the finer the micron the bigger the discount.

Room 2 wools weren’t as adversely affected as skirting’s fell by 50 to 70 cents. Cardings looked to be the least affected sector as the MCI fell by 24 cents to 961 as most types retreated by 10 to 50 cents. This puts the Carding Percentile at just 12% for the past 5 years, ie it has been higher 88% of the time over the past 5 years.  The peak of 1563 was September, 2018, a 44% fall to today’s level. With the only meaningful volume of XB wool available in Melbourne their quotes had 28/30 microns off by 30 to 50 cents.

The market has ended the season on a sour note at 1715, a 400 cent fall from the dizzy heights of mid August when it peaked at 2115, a 19% fall. The EMI spent 11 weeks above the 2000 cent mark and 19 sales in the 1900s and 15 weeks below 1900.The month of June has seen a massive drop in the EMI, falling by 172 cents (9.1%), second only to the biggest monthly fall of March of 1991 when the Reserve Price Scheme was abolished. The year on year figures of wool offered show a drop of 11.9% - 225,180 bales less than last season. The actual volume sold was 296,325 bales less (16.6%) than last season. The FRX has had little movement over the year, depreciating by 3.63 cents with the pass-in rate climbing to 10.5% for the season from 5.6% the previous year. Is this the end of the “super-cycle” that started in 2016?? Despite the falls in the latter part of the season the 3 regional indicators are all higher than the commencement of the 2017/18 season.

Reasons are varied for the fall from grace for wool prices. As the global economy slows and consumer spending patterns tighten, excess stock of wool products from garments to tops are being reported in China. This, combined with the ongoing trade war (US/China), Brexit troubles and the attacks on the two oil tankers in the Middle East, we are sailing into uncertain times as global confidence wanes. Buyers are reporting no change in direction for the wool market to open the new season.

Ag Concepts Fwd Prices as at 28 June, 2019        

Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 21st June, 2019

 AWEX Northern Micron Indices Comparison

FINALLY, IS THIS THE BOTTOM?!!

Just when we thought the wool market couldn’t get any worse it did. The AWEX EMI collapsed by another 57 cents to 1766, eclipsing the low point in early November (EMI at 1776) and now at its cheapest level since March, 2018. All MPGs fell by 45 to 60 cents with even the good spec types not immune from the lack of support for the first time in many weeks. 20% of fleece wool was passed-in on the first day as some lots were up to 100 cents cheaper or completely neglected.

Skirtings suffered the same fate as their fleece cousins, low VM (< 3%) with good L&S results lost 20 to 30 cents while the dusty, burrier types falling by 50 to 80 cents. Cardings continued their losing run as LKS remained unchanged while STN/CRT gave up another 20 to 40 cents. Crossbreds also couldn’t muster any support either as falls ranged from 10 to 30 cents for most types.

Buyer support was almost non-existent on the opening day as the market was almost in freefall despite the smallest weekly offering for exactly 10 years (19,000 bales) and the A$ falling below 69 cents and losing 1% against the Chinese Yuan. A lot of showfloor talk centred around the obvious lack of business and also possible defaults on payments through the processing pipeline - ie letters of credit (LCs) not being honored as financing issues for manufacturers bite as tight cash flow situations are hampering normal business practices. We could be at an attractive price that might see commitment to do business but the ongoing finance troubles and lack of supply to cover too much forward exposure is making mills hesitant to write big volumes of wool.

Most manufacturers sat out of the market as prices descended to what should be favourable levels but retailers are very hesitant to place new orders as consumer demand falls amidst slowing economic growth globally, Brexit uncertainty and the ongoing US/China tariff war restricting confidence. The movement of tops, carbo and yarn to fabric and garments is essential for the predictability of demand through the entire supply chain.

Despite the big opening day’s losses there was a definite change of attitude on the final day as prices steadied and losses were kept to a minimum even with the largest Chinese indent buyer still sitting on the fence and one of the other operators still purchasing but not to their full extent. We thought the bottom was a few weeks ago (1833) but the market has lost 121 cents over the past 3 sales. Hopefully this is it?? Will supply over-rule demand as SA now go into recess till mid August? With 3 sales to go here we are the only source of global supply in the short-term. A few buyers this morning thought that the market might hold at these levels after a bit of inquiry overnight and some business being written. Let’s hope so!!

Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 14th June, 2019

 AWEX Northern Micron Indices Comparison

NOT OUT OF THE WOODS YET

The market continued on its downward trend as the AWEX EMI lost 41 cents to 1823, its lowest point since early November when it fell to 1776. The past fortnight has seen the EMI lose 64 cents, completely wiping out the 54 cent rise of 3 sales ago. The slight fall in the A$ to low 69 cents didn’t help at all as the EMI in US$ terms gave up 39 cents to 1260. Finer types < 18.5 bore the brunt of the losses - 75 to 100 cents regardless of quality as the higher volume and low yields coupled with subdued demand take their toll on this sector. 19s and broader were wound back by 40/50 cents and, as has been the standard practice for some time in a falling market, better style wools (19 to 22 micron) with good specs were not discounted as much as the inferior, tender, dusty types.

The skirting sector also fell but not to the extent of the fleece types, as 10 to 30 cent losses covered most wools. Cardings fell by 10/20 cents for LKS and CRT while STN gave up 60 to 80 cents to see the MCI fall below 1000 cents, the lowest point for 5 years. Crossbreds weren’t immune from the falling trend as losses looked to be about 20 cents for 25 to 30 micron.

Processors and topmakers dominated the merino market and firm offer forward contractors held sway in the crossbred sector. The two large Chinese indent buyers were very quiet again this sale bar the final day that saw one of them increase their buying activity.

Industry discussion on welfare standards are never far off the agenda and recently the issue of use of pain relief products has been at the forefront. The good news is that there is beginning to be a realisation in some sectors internationally that Australian woolgrowers do practice best welfare standards particularly when pre and post anaesthetic and analgesia are used. The national wool declaration unfortunately only shows a 35% uptake of these products but the figure is likely to be a lot higher. Woolgrowers (merino and crossbred) have little to lose and everything to gain by getting right behind both the NWD and use of pain relief products. We need to protect our rights to grow wool and run our sheep the way we want to without either Govt. or anyone else using a big stick. Next week a very small offering in two centres of just over 20,000 bales should see the ship steady.

Ag Concepts Fwd Prices as at 14 June, 2019

Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 7th June, 2019

 AWEX Northern Micron Indices Comparison

MARKET CONTINUES ON ROLLER COASTER RIDE!!

The fickle nature of the wool market was no more evident than this week as, after a good recovery last series, the lack of any further sales with very little business written saw the market give up half of last week’s gains. The EMI fell by 23 cents to 1864 with little movement in the EMI in US$ terms (-7) to 1299 as the A$ ascended to a high point of 70 cents following the RBA’s announcement on Tuesday that saw interest rates cut to 1.25% and another cut sooner rather than later to try and stimulate the economy. All sectors of the market fell. Merino fleece indicators lost 20 to 45 cents with only the high yielding, low VM types with good AM results unaffected or even up to 20 cents higher with the inferior wools on the receiving end of large discounts (one dominant topmaker not competing on < 55% yield fleece wools). Skirtings took a battering as losses ranged from 40 to 60 cents. Crossbreds lost 10 to 30 cents depending on micron while in the Carding sector LKS and STN gave up 10 to 30 cents while CRT escaped the carnage as the MCI in Melbourne fell below 1000 cents to 992. Cardings have been belted since last September’s peak when the 3 centres averaged 1583, a fall of 567 cents to this sale’s average of 1016, a 36% fall.

Why the sudden change of sentiment?? That is anyone’s guess. Most traders were reporting that all the enquiry and new business for last sale was just that, a one week peak and back to a stalemate. The two biggest Chinese indent buyers were still virtually inactive with the slack taken up by their 2 largest topmakers and a few mills were reluctant to commit orders for this week’s sale with only 21,700 on offer. Also on the horizon, literally, is wool arriving from South Africa (10,000 to 15,000 bales) into China following the FMD embargo being lifted and a slight glut of wool to be processed there. Next sale has 29,000 bales on offer which might convince the fence-sitters to re-enter the market confident that the wool they need to buy is available. AWTA reports May testing figures are 17% less than May last year and progressive figures for the season are 11% behind the previous season - 302 mkg compared to 339 mkg.

Ag Concepts Fwd Prices as at 7 June, 2019

Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 31st May, 2019

 AWEX Northern Micron Indices Comparison

MARKET REBOUNDS WITH A VENGEANCE!!

The wool market’s resilience has been no more evident than in this sale following the fortnight of big losses. Signs that prices may have leveled last Thursday with very minor downward adjustments gave growers hope that fortunes would turn and a rebound was imminent. Talk on Friday that business was written the previous night and the market would be okay was on the money with one buyer sending texts that the market would be “definitely dearer” as plenty of new business was done on Friday afternoon.

All sectors of the market rose as the EMI posted a 54 cent gain to 1887 wiping out almost half the losses of the 2 previous sales. The rise was similar in US$ terms, 46 cents to 1307 as the slight ascendency in the A$ had no adverse effect. The mid microns (18 to 22) had the largest gains, 40 to 50 cents while < 18 added 20 to 35 cents with buyers desperate to secure the limited volume of superior types (100 cents higher) with the inferior types even playing catch-up as lack of quantity came into play. Skirtings clawed back the recent losses with rises of 30 to 50 cents. LKS drove the MCI up as they gained 20 to 30 cents and, after the 2 sale savaging that XBs took, their prices recovered by 50 cents.

Why the sudden change of sentiment?? Trying to figure that out is nearly impossible. Fundamentals haven’t changed, global economic growth is slowing, consumer confidence in China has dipped, the US/China trade war is still raging, there is price resistance at the retail end and last stage processing and still the ongoing problems in the UK with Brexit and a new British PM on the horizon. These past few weeks are just a classic case of how things can change in the blink of an eye, from “doom and gloom” to “all good” overnight. When they need to buy wool nothing else matters and when the market falls there are many varied theories as to why.

Where to from here?? Commodity markets have a habit of fluctuating widely and the wool market is no different. One certainty is the lack of volume. The national offering this season to date is 215,000 bales (12%) less than last year. For the past 2 sales and the next 3 to come, the average weekly volume is just 23,000 - 4,000 bales/week less than last season. Will the tight supply be enough to keep the market trending dearer???

Ag Concepts Fwd Prices as at 31 May, 2019

Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 24th May, 2019

 AWEX Northern Micron Indices Comparison

MARKET FALLS SHARPLY BUT BOTTOM IS IN SIGHT!!

Further negative sentiment from buyers saw the market retreat even more as the AWEX EMI lost 60 cents to 1833 and 49 cents in US$ terms to 1261. These indicators are now 150 and 241 cents behind levels from this time last year, 7.5 and 16% lower with the A$ 9% less at 68.7 cents. The major decline in the market was on the opening day as sentiment steadied on the final day. All micron indicators fell sharply, 40 to 80 cents with the familiar pattern of better style, low VM and the odd non-mulesed lot selling at market rate or up to 50 cents clean better with the tender, burrier, low yielding types getting smashed by up to 200 cents.

Skirtings also bore the brunt of poor buyer sentiment as low   VM fine types fell 50 to 70 cents while burrier lots gave up 70/100 cents. Cardings weren’t immune from the falling market either as all types lost 20 to 60 cents. The shine has certainly come off the XB sector after its stellar run since January. 26 to 28 micron lost 100 cents while 30s and < 26 fell 50 cents. This equates to a 219 cent (14%) collapse for 28s over the past 2 sales.

All the problems that led to the market falling last week are still well and truly in place. The lingering trade dispute/tariff war between the US and China is the major factor contributing to the slowdown in the Chinese economy and a sudden dip in their consumer confidence is flowing through mills reluctant to purchase wool as price pressure is mounting from manufacturers and retailers that are struggling to move dearer stock of fabric, garments and yarn that is building up in volume. Costs have also become dearer at early stage processing with scouring costs escalating with more water needed to combat the dustier wools and higher wastage costs incurred.

In response to their economic slowdown the Chinese government has loosened monetary policy ie lowering interest rates on consumer debt (mortgages) and devaluing their currency (Renminbi) against the US$ which has fallen sharply since tariffs were raised to 25% making Chinese exports to the US cheaper.

The EMI has fallen 120 cents (6%) over the past 2 sales. Even with a favourable FRX rate, the A$ at its lowest point since the GFC and weekly offerings under 30,000 bales the market has suffered. Let’s hope the steadier market on Thursday is a signal that we’re at a level where new business has been written and prices ascend!!

Ag Concepts Fwd Prices as at 24 May, 2019

Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 17th May, 2019

 AWEX Northern Micron Indices Comparison

MARKET FALLS. UNCERTAIN TIMES AHEAD!

The stalling market last sale turned into a full blown collapse this week as the fears that a lot of processors not being able to pass on the higher wool prices to downstream users finally caught up with growers. Manufacturers and retailers are seeing more and more resistance from consumers for the higher priced garments - this wool being purchased over a few peaks in the market that now were deemed as unsustainable through the pipeline. Adding to the sour sentiment is the ongoing trade tension and increased tariffs on Chinese goods exported to the USA. Demand has been lowered by current price structure and the trade war and weaker global growth. China buys 75-80% of our wool and consumes half of that with the USA - a big purchaser of tops, yarn and finished goods.

Losses were across the full spectrum as the EMI lost 59 cents to 1893, its lowest point for six months. All merino indicators lost 50 to 70 cents with the poorer style types up to 120 cents behind these new price levels with some lots 200 to 300 cents clean down from their original valuation. Skirtings lost 40 to 50 cents. Cardings also bore some savage losses. STN fell 70/110 cents, LKS 20 to 30 while CRT remained unchanged; the 3 centres averaged 44 cent falls. Crossbreds took some big hits also.  Most XBs have climbed by 50% since Christmas but this came to an abrupt halt this sale. Losses ranged from 110 to 145 cents in Melbourne for 26 and 28 microns (10% falls). The national pass-in rate escalated to 22%.

This week’s falls came as FRX rates favoured the A$, now 69.15 cents and small volumes are being offered. This does not always guarantee a rising market. The US/China trade dispute flared up this week as the US announced a 25% import duty to be imposed immediately on US$200 billion of products from China, up from 10%. Included is greasy and semi-processed wool, yarn, fabric and carpets but not wool clothing. China retaliated with its own 25% tariff targeted at agricultural products. News came through late last Friday on the lifting of the ban of South African wool exports to China. Scoured wool can be imported and greasy wool is subject to temperature conditions as the FMD dies over time dependent on the temp, the higher the temp the quicker it dies. Just 25,000 bales are on offer next week but, unfortunately, we may see more of the same.

Ag Concepts Fwd Prices as at 17 May, 2019

Main Buyers (This Week)

WEEKLY MARKET REPORT 

Week Ending 10th May, 2019

 AWEX Northern Micron Indices Comparison

MOMENTUM STALLS BUT FOR HOW LONG?

The week to week national catalogue was reduced by 24% to 32,800 bales. The FRX was in favour of the A$ that dropped to a 3 year low below 70 cents. Many buyers were reporting that processors need to purchase wool after orders had been placed and the short term forecast for quantities in the low 30,000 range should have augured well for a rising market?? Not necessarily as one of the 2 big buyers for China was still cautious in their purchasing patterns securing only 4% (down on their usual 10/15%) of the volume bought. Their absence and a “sit and wait” approach by most other exporters saw the market drift by 8 cents to 1952 and 13 cents to 1361 in US$ terms with most falls on the final day of sales. The indicators gave up 10 to 20 cents as good style types barely moved while dustier wools came off as much as 50 to 70 cents in some cases.

The skirting market split into two as < 17 micron lost 20/30 cents while all others were solid to sellers’ favour. Cardings had a steadier sale as the East Coast indicators were unchanged to a touch dearer while in Fremantle their MCI gave up 25 cents to have all 3 markets within 5 cents of each other (1089 to 1094). Crossbreds  had subtle rises, up to 10 to 15 cents that continued to create new records since reporting these microns began, 1976 (30 micron) and 1983 for 28s and 26s within 20 cents of their all time record set in June, 2018.

Key data was released this week on Australian wool exports’ destinations and value. The season to March has volume exported down by 12% (an obvious fall in production) but an increase in value of 3% indicating just how good the market is going. Countries to lose volume were: China back by 17%, Czech Republic 36%, Egypt &Taiwan 24% and Malaysia down by 41%. China’s value was just 1% lower with India and Italy + 14%, Czech Republic -21%. The big mover is Thailand, their volume up by a massive 167% on the previous season and value climbed by 145%, a sign that more and more processing plants are relocating from other parts of Asia to the lower wages/costs countries. 33,300 bales are rostered next week. We will offer 1072 on Thursday and, hopefully, all exporters are operating to full capacity to secure the dwindling volume on offer.

Ag Concepts Fwd Prices as at 10 May, 2019

Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 3rd May, 2019

 AWEX Northern Micron Indices Comparison

MOMENTUM BUILDING!

Wool sales recommenced this week following the Easter/ANZAC day holidays. After the market’s solid performance at the Easter Show hopes were high that the market had finally bottomed out and recovery was under way. The few buyers that were pre-valuing last Friday reported a bit of business being written and some mills being caught short for wool to process and the depreciation of the FRX by 1.5 cents also assisting any thoughts of ramping up purchasing patterns. The opening session saw 80% of the fleece selection in the good/best topmaking style (4/5) to see increases of up to 30 cents that lasted through to the final lots on the closing day. The AWEX EMI increased by 17 cents to 1960 but, as the A$ strengthened, this saw the market retreat in US$ terms - back by 21 cents to 1376. Most increases came in the good/best topmaking style types with the ever growing volume of poorer style wools losing ground to their superior counterparts - the gap between the good and inferior types widening.

Skirtings also benefitted from the renewed support as all descriptions lifted by 15 to 25 cents. Cardings shock off the run of falls to average 15 cent rises across the 3 centres. Crossbreds continued on their record breaking run as most microns jumped by 10 to 65 cents. This has a good 28 micron fleece type making 850 to 950 cents greasy and 26s over 1000 cents - incredible money!!

Talk of the market rising was spot on. Despite the national volume lifting to 43,000 bales (due to the 1 week recess) the extra wool was well absorbed by the buyers even with the absence of 2 of China’s largest indent buyers. Diminishing quantities over the next 3 sales (averaging 32,000 bales/week), the favourable FRX and fresh business being written all augurs well for a solid to dearer market for the immediate future.    

As is the case at the end of every month, latest AWTA figures were released. They showed a sharp decline in wool tested this April compared to 12 months ago 10%. The progressive total for the season was the same coming in at 10% less as offerings are just shy of 200,000 bales less than last season to date. The national catalogue drops back to 33,000 bales next week. If the Chinese indent buyers re-enter the market, price rises could be in the range of what was discussed earlier this week on the showfloor. Hope you are all getting the rain. 

Ag Concepts Fwd Prices as at 3 May, 2019

Main Buyers (This Week)

 WEEKLY MARKET REPORT 

Week Ending 18th April, 2019

 AWEX Northern Micron Indices Comparison

MARKET FINALLY SETTLES!

The wool sale was held at the Royal Easter Show this week and had an overall positive tone to finish this run of sales before the 1 week recess for Easter and ANZAC Day. The AWEX EMI posted a 7 cent increase due mainly to Melbourne’s momentum, up 11 cents, compared to the 1 cent rise in Sydney.  The Sydney market opened on a solid note only to see sub 18 micron fade late in the final session to end the sale 5 to 15 cents cheaper and broader types either side of unchanged by 5 cents. Again buying strategies were a mirror image of previous sales - good types with the right specs were in hot demand as the vast quantity of poorer types were cheaper dragging the indicators lower.

Skirtings made little inroads into their run of falls over the past month as the best style lots lifted by 10/20 cents while all other types were firm. The carding market continued to fall with LKS losing 15 to 30 cents as all other descriptions remained unchanged. The appetite for XB wool seems insatiable at the moment as more records were set for 28/30 microns - rises ranged from 20 to 40 cents.

The market finally put the brakes on the long run of falls, 7 weeks and 91 cents, the longest falling run since late 2003. While this run of falls is disappointing, it was preceded by an 8 week run of increases that started in the final sale of 2018 and the gain was 178 cents, so still an indicator that is 87 cents to the good since December.

More news to come out of the IWTO Conference: Giovanni Schneider (MD of the Schneider Group) gave an update of the wool textile industry in Italy. Wool makes up just 1% of global consumption of fibres. Italy accounted for 11% of fibre used in their textile industry (men’s knitwear). Conditions in the worsted weaving business were difficult with manufacturers and retailers holding excess stocks of suits and a major challenge for the industry worldwide was the ever increasing demand from consumers for sustainable products. Another presentation on the British wool market highlighted the low prices for > 32 micron wool which are now very competitive compared to nylon. Brexit would not affect the price of wool but the British Wool Marketing Board has started a new marketing campaign to lift grower returns. Wool sales recommence on 1^st May. 

Main Buyers (This Week)