Smaller offering pushes wool prices higher

Reduced quantities in wool market increases buyer demand

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Smaller offering sees prices increase, but wool is still amidst a major downturn

Smaller offering sees prices increase, but wool is still amidst a major downturn

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Smaller offering in Australia's wool market takes figures out of the red, but the commodity is still amidst a major downturn.

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After five weeks of successive losses, the AWEX Eastern Market Indicator (EMI) lifted by 32 cents to land at 890 cents per kilogram.

The result comes off the back of a reduced offering in the wool market spurring some strong demand across all categories.

The national offering saw 9345 bales less than the previous week with 19,654 offered, resulting in stronger competition amongst buyers in Sydney and Melbourne on Tuesday.

And the national pass-in rate improved as sellers met the better market, dropping by 15.8pc.

AWEX senior market analyst Lionel Plunkett said by the end of the first day of selling, the individual Merino fleece micron price guides (MPGs) in the eastern centres had risen by 27 to 35 cents.

"On the back of these rises the EMI gained 39c for the day, a rise of 4.5 per cent," Mr Plunkett said.

"In percentage terms this was the largest rise in the EMI since January."

Wednesday saw the Melbourne market soften, but Fremantle surged to come in line with the eastern selling centres gaining 25 to 39 cents for the day.

Skirtings followed a close path to fleeces, with most types and descriptions adding 30 to 40 cents for the week.

Crossbreds however enjoyed the largest gains, with 26 to 30 microns gaining 25 to 46 cents.

But despite the slight rise in numbers, the Merino wool market is still harbouring a dramatic downturn, which the added effect of Covid-19 has only deepened.

According to Mecardo analyst Andrew Woods, the current down cycle in Merino prices, which is 60pc, even though it is on par with 1932, it's not as large as the four main down cycles of the 20th century, which fell an extra 10-15pc.

"The four biggest downturns of the 20th century fell in price by 70 to 80pc," Mr Woods said.

"Prices are currently down by 60pc on the 2018 highs, so there is potential for prices to fall in the next couple of quarters.

"The downturns in price in 1921, following the Spanish flu, saw prices fall by 75pc, before recovering well in 1923."

He said unfortunately, this means historically there is some precedent for further downside in the coming months if demand does not improve.

"If the market follows recent recoveries, prices will be expected to recover around half of the 2020 losses a year or more after the cyclical low has been made," Mr Woods said.

"Now, the uncertainty centres on time, and how long before we can expect prices to start picking up.

"The key point to remember is that we do not know when the cyclical low point will be. That is for hindsight to determine."

This week the national quantity increases to 33,558 bales. Sydney and Melbourne will sell over two days, while Fremantle will again only require one day of selling on the Wednesday.

The story Smaller offering pushes wool prices higher first appeared on Farm Online.

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