Wool’s bull run lures

WOOL’S bull ride continued last week after the eastern market indicator (EMI) stumbled by 9 cents on Thursday to close the week at 1016 cents a kilogram.Reaction to the strong wool market momentum has caused many woolgrowers to pull wool from hold sales, sparking concern among woolbrokers of future supply shortages.Elders Wool technical manager Simon Hogan said the recent three-week price rally had seen a significant number of Elders clients drag wool from hold sales.He said Elders total bale offering had risen by 20 per cent for this time of year, driven largely by people dragging wool – most four to five years old.“Our hold stock is biased towards the finer end and, given the strength of this market, we are noticing a significant shift.”On top of growers choosing to offload held wool for current sales, Mr Hogan said a number of producers were allocating wool into the first Melbourne sale of next financial year in a bid to spread their income. “Come the recess we are anticipating hold stock will be as low as 5 to 7pc,” he said.Rodwells wool manager Michael De Kleaver said a rush from growers to sell held wool has driven Rodwell stored wool down by two-thirds since December 2006.He urged growers to consider the unquantified supply situation the historically volatile market was moving towards.“Everyone wonders where the market is going and are anticipating a downturn as we have been on a good run for 18 months,” Mr De Kleaver said.“But the important issue to note is that we are running into a completely new situation where production rates are down. Pipeline wool has not been this low since the 1980s and there is no official stockpile – a situation not seen since the early ’70s.”Platinum agribusiness director and wool futures trader Bill Mitchell said the futures market had lost significant ground in the past four trading sessions as a result of an expected weakening in auction prices but there was still nothing in the “big picture to pre-empt a downturn”.“Using the August contract as a bench mark when the EMI traded at 1065c/kg, it has dropped off by 50c/kg this week,” he said.However, after four weeks of price growth and the US dollar rising by two cents to US83.8c this week, Mr Mitchell said a correction was necessary.“We are seeing futures with maturity go from trading at a premium to trading at a discount and auction prices, which indicated the market is expecting prices to fall slightly,” he said.With China dominating the market and supply at a macro level supporting the market, he said there was little need for grower caution.