SA’s fine woolgrowers are celebrating their best returns in at least five years, receiving $2000 to $2400 a bale.
Last week the Eastern Market Indicator hit a record 1079 cents a kilogram, largely driven by rises in the 18 micron and below categories.
The 18 micron price guide has risen more than 20 per cent since September last year and the premium for 18M compared to 21M has also widened from 150c/kg to 400c/kg.
Australian Wool Network SA wool marketing manager Rod Miller says the fine wool rally has been great news for many high rainfall, fine wool Merino flocks from Kangaroo Island, the Fleurieu Peninsula and Lower South East, which were in the “sweet spot”.
Mr Miller says there had been a fundamental shift by China to buying high yielding wools with good tensile strength less than 19M.
Western Europe, Italy, Japan and South Korea mills are competing with them, pushing prices up.
“When prices are this high it is based on real demand and the need for restocking,” Mr Miller said.
“Some of it is China buying ahead of the Chinese New Year but processors need wool and there is a definite desire for the better-type, fine Merino wools.”
Mr Miller says the new EMI record was set in a week of more than 50,000 bales being offered for sale and volumes being up 8pc year-on-year, which was a positive demand sign.
“We will start to see more agricultural and pastoral wools with higher vegetable matter levels which could test the market, but the demand for better wool types should flow through to other wool types," he said.
Rosewood Wool Services independent wool consultant Andrew Dennis says the fashion trend for “fake fur” is driving strong demand for finer microns.
He says there has been surprisingly little pushback from the trade from the recent price rally, largely due to more 20M and finer wool being positioned in less price-sensitive high-end fashion and high performance sportswear.
“Wool’s competitor must be cashmere not cotton or synthetics in a $49.99 jumper or trousers,” he said.
“Farmers will never earn good profits competing with cotton and synthetics with their wool but Australian Wool Innovation has done a great job working with commercial partners pushing high-end woollen products.”
Mr Dennis said the futures market had been active, which was a promising sign for prices holding up, and encouraged woolgrowers to consider locking in their 2017 production.
Early this week there was only a 50-70c/kg discount for 21M futures for July delivery and 19M puts had traded at about 1700c/kg clean for April.
“Wool is a volatile commodity and at some point it will come down but whether that will be April or May or August or November, or 2018 is still unclear,” he said.
“If cotton prices were where wool is, every cotton producer in Australia would be rushing to lock in and many wheat growers would do the same if wheat prices was at historical highs like they are for wool.”
“Wool does not have the production risk of wheat so it is strange not many woolgrowers feel comfortable selling forward.”
Elders South East district wool manager Steph Brooker-Jones says growers need to look at their type of wool including the micron and mid break point when making a decision about marketing their wool.
Last week some of her clients sold fine wool up to 60c/kg above appraisal but some medium and broader types were passed in below appraisal, especially those with a high mid break.
“Prices for 19M and finer are the best they have been for at least five years but the medium microns are back but still near historical levels,” she said.
“The 32-34M wools are taking a hit but as a crossbred ewe and lamb unit they remain a very profitable package,” she said.
“Merino cardings are hanging in there and crossbred cardings are volatile.”
Ms Brooker-Jones says South Australian sheep breeders continue to enjoy excellent returns, whether they have self-replacing flocks, are traders or terminal lamb producers.
“A positive is the SA flock average is down about 20M so good Merino types 20-23M are breeding hoggets and lambswool in the 17-18M range where the demand is.”
