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Beyond the Bale : December 2016
MARKET INTELLIGENCE REPORT END OF YEAR SUMMARY The base of all agricultural trade inevitably swings back to a simple supply versus demand analogy, and at present this could not apply to wool trade more fittingly. This is due to several reasons, but predominantly, the lack of stocks globally in all parts of the supply chain sees wool very reactive to key pricing influencers. Changes to expected volumes offered and adverse or unpredicted currency or price conversion movements from garment back to the raw material are examples of two of those simple key ingredients currently plotting the traded price course of wool. These effects are part of the ‘hand to mouth operation’ and this sourcing method is likely to continue into the foreseeable future, so exaggerated price movement of a greater magnitude may result given adverse changes in the fundamentals. Overall sentiment and current market indicators are highly suggestive of positivity remaining on the demand side. Prices should stay in the higher percentile bands in those wool type areas of production that are stable or lower in supply. Conversely the wool types growing in supply will be somewhat restrained until a price point is hit whereby they can be consumed on a greater scale at a lower consumer price point. GROWTH IN PRICE FOR MERINO FLEECE TYPES At the beginning of November in the 2016/17 season, the Eastern Market Indicator (EMI) sits at 1320 ac/kg clean compared to an EMI of 1207 ac/kg clean just 12 months ago. All Merino fleece types are in a positive position compared to a year ago, with impressive gains of around 100 ac/kg clean seen for those wools finer than 19.5 micron and 50 ac/kg clean for types in the range of 19.6 to 25 microns - see graph above. The crossbred segment has seen a lesser performance over the year as the growing global supply has taken toll on that sector of the market. DROP IN AMOUNT OF WOOL TESTED... The AWTA Key Test Data for the 2016/17 season released in early November indicated there had been a 3.6% drop in the amount of wool tested compared to the 2015/16 season. A volume of 110.8 million kg greasy has been tested since the season commencement in July 2016, compared with 114.9 mkg greasy for the corresponding period last season, a drop of 4.1 mkg greasy. Whilst those figures demonstrate overall weight tested is down, the comparisons of when total lots tested and total bales tested are exposed, it shows a season to season reduction in sale lots of 6.1% (ie larger lot size) and 4.4% less bales (ie heavier bales). As an aside, these figures give stimulus, as both larger lot size and heavier bales aid in the overall cost efficiency of the industry’s selling and logistics systems. ...BUT INCREASE IN AMOUNT OF WOOL AT AUCTION Interestingly, and perhaps contradictory to the supply trend, is the change in the amount of wool offered at auctions. This season has actually seen an increase of 5.2% in first hand offered wool at auction. In early November of the 2016/17 season 64.8 million kg clean had been offered for sale compared to 61.6 million kg clean. Encouragingly, this larger offering has not aggressively impacted upon the demand for the fibre and prices have remained at very positive levels in the Merino sector and average prices for the crossbred descriptions. Adding to the supply paradox, production figures released and updated by the Australian Wool Production Forecasting Committee has continually forecast the 2016/17 season to be unchanged at 325 million kg greasy in wool production terms. As we head into the annual three-week Christmas recess in wool auction sales, we make a brief assessment of the current price situation and identify any trends emerging from the 2016/17 season thus far. FibrePrice(AUD) $9.00 $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 $16.00 $17.00 $8.00 $7.00 $5.00 $6.00 Oct 2014 Dec 2014 Feb 2015 Apr 2015 Apr 2016 Jun 2015 Jun 2016 Aug 2015 Aug 2016 Oct 2015 Oct 2016 Dec 2015 Feb 2016 EMI 19 micron 17 micron 28 micron 30 micron 2 YEAR WOOL PRICE - MERINO v CROSSBRED ACOF DRY MARKET INTELLIGENCE 51
In the Shops - March 2017