Wool prices reflect tight supply

And the price continues to reflect this, with the Eastern Market Indicator (EMI) climbing 13 cents a kilogram to 1923c/kg.

Producers hoping for a bounce in price in the New Year are seemingly happy with returns, with only 6.7 per cent of the bales offered passed in across the country.

Landmark reported the impact of the drought on Merino fleeces held back most micron categories in Melbourne, with only the 17.5 and 18 micron indicators moving higher.

It was the crossbred fleece lots with low vegetable matter which experienced the strongest demand, with the 26 and 28 micron indicators gaining 53c/kg and 56c/g respectively in the south.

The 17.5 and finer micron price guides all sit slightly below year ago levels, but all guides from 18 micron and broader are trending above the same time last year.

The 17 micron indicator, for instance, is currently sitting on 2516c/kg, compared to 2665c/kg last year, while the 10-year average is 1690c/kg.

For 19 micron, it is up to 2295c/kg, from 2144c/kg last year, and compared to an average for the past decade of 1429c/kg.

Australian Wool Innovation’s (AWI) weekly market wrap pointed to supply concerns driving market prices higher, despite almost 100,000 bales being offered so far this year.

It described Australian stored wool stocks as being at minimum levels

“The super fine types (finer than 18.5 micron) were in abundance this week, with a high percentage of this sector being made up of drought fine wool types,” AWI reported.

“Whilst Australian Wool Testing Authority figures are showing an overall reduction of 12 per cent in the national wool clip, the volume of Merino wool in the super fine category has actually increased from year to year.

AWI puts the up to 100c/kg and higher price gains for the fine end of the crossbred offering, 25 to 28 micron, down to those wools, of which Australia is the major source, being a cheap means of keeping processors’ machinery running, as they can be combed at similar settings to Merino fleece.

Mecardo analyst Andrew Woods agreed, saying the continued undersupply and high prices of Merino wool must be making processors look closely at the relatively cheap crossbred option.

“[Given] the relatively low price in relation to Merino wool for the past 15 months and the continued strength of Merino prices, there looks to be the prospect of the 28 MPG testing it’s US dollar highs of recent years, which is around US750 cents - that indicates the potential for prices rises of 100-150c/kg for the 28 MPG,” Mr Woods said.

The National Council of Wool Selling Brokers of Australia executive director Chris Wilcox said in his weekly market wrap the 51,703 bales offered last week was the highest weekly offering since April last year.

But it was still a historically lower offering for the time of year, even compared to recent years.

“For example, for the same sale week in January 2016 there were 59,775 bales offered, in January 2017 there were 56,077 bales offered and in January 2018 there were 54,350 bales offered,” Mr Wilcox said.

“This decline reflects the impact the drought in Australia is having on wool production.”

The Australian Wool Industries Secretariat expect volumes to fall over the next three sales, ranging from 37,005 bales to 41,503 bales - 4.3 per cent less than in the same period last year, and bringing the forecast year on year difference to 15.6 per cent less wool offered by the end of that period.