A momentous year for wool

A momentous year for wool


Analysis
Eastern Market Indicator - While November had the EMI briefly below 1800¢, resistance to meet the market from wool producers produced a recovery which was maintained to the end of the selling year.

Eastern Market Indicator - While November had the EMI briefly below 1800¢, resistance to meet the market from wool producers produced a recovery which was maintained to the end of the selling year.

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Despite its early bravery in October, the Eastern Market Indicator was unable to sustain the heady 2,000¢ plus levels experienced through to the end of 2018.

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DESPITE its early bravery in October, the Eastern Market Indicator (EMI) was unable to sustain the heady 2,000¢ plus levels experienced through to the end of 2018. It eventually slipping 151¢ to finish 2018 at 1,862¢. In US$ terms it also retreated, dropping 115¢ to 1,346¢.

Reflecting on the calendar year, the EMI posted a 5.8pc increase, however, this mirrored the fall almost exactly in the Au$. The EMI in US$ terms was in fact slightly lower compared to January 2018.

Moves in individual MPG categories were impacted by the drought on the east coast; the resulting increase in fine wool constrained the finer end of the clip while reducing supply (again predominately drought related) in medium wool MPG’s, which also assisted the price.

1.599 Million bales of wool were sold in 2018, that’s 182,000 fewer than in 2017. This reduction only became a factor from July 2018 onwards with the drought impact on wool cuts and sheep numbers taking its toll.

There was a response from wool producers to the softer market and they were prepared to take a bullish stand on prices, passing in an average of 12.8pc of bales offered over the October to December period.

As with all sheep producers, wool growers have for some time now received the benefit of good sheep prices as well as prolonged strong wool prices contributing to strong income flows. This allows wool sellers to hold wool in store if they view prices as soft and likely to recover due to supply constraints.

It is unlikely that 2019 will see any change to the trend of reduced supply, as large-scale abattoir throughput of mutton sheep points to a continued destocking in drought areas. This, combined with the continued dry negatively impacting on fleece weights, will retain supply pressure on the market.

Any rain induced supply increase will take time to appear (it doesn’t rain grass!). While growers restocking by holding onto more ewes will occur post good rain, it will also take time for the flock to grow coming of this low sheep number.

The story A momentous year for wool first appeared on Farm Online.

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