Larger wool volume not expected to lower price at auctions this week

Wool prices have improved in the past few weeks, along with a more positive sentiment. But with a large volume on offer this week, how will prices react?

Wool prices were 5-20c/kg higher last week, with a more positive sentiment surrounding the market.

And despite a larger number of bales on offer this week, before the three-week winter recess, prices are expected to continue on a positive track.

The benchmark Eastern Market Indicator rose 9c/kg to 1221c/kg clean last week – this is 114c/kg higher than the same time last year, but almost 100c/kg lower than the 10-year average.

There was only 23,623 bales on offer last week, with 5.2 per cent passed-in, while 38,045 bales will be offered nationally this week.

Most Merino fleece was 6-20c/kg dearer, while crossbred wool and cardings were 1-7c/kg higher.

Fox and Lillie brokerage manager Eamon Timms said the small offerings were helping the market, but demand was still reasonably constrained.

“The market in general was more positive than it has been, there was good competition around the 22-24 micron wool as well as cardings and skirtings,” Mr Timms said.

“A lot of mills need to keep machinery going, over the winter recess, so it is more machine driven demand than solid retail demand.”

Mr Timms said an anticipation of no sales for three weeks, there should be enough incentive and the market is expected to finish a bit higher than last week.

“What’s having the most impact on wool at the moment is the uncertainty around policy and tariffs with the US and China.”

Eamon Timms from Fox and Lillie auctioneering wool. Picture: Zoe Phillips

According to the Australian Wool Innovation market commentary there was a “cautiously optimistic atmosphere in sale rooms... with positive market outlooks starting to overwhelm the negative”.

“Supply is at the top of all participants minds and the shortfalls are starting to see a more willingness from buyers to pay more to secure supply,” it said.

This was evident last week as 48.4 per cent of the Merino fleece sold went to the four direct top making and vertically integrated factories buying representatives from China.

“The purchasing strength of the largest Chinese top maker was exhibited in Sydney on the final day of selling. An extraordinary buying day saw them buy over 36 per cent of all Merino fleece sold for the day in that centre,” the report said.

Southern Aurora Markets partner Mike Avery said “the tight supply seems to be winning the short-term battle with tepid demand”.

Mr Avery said all micron groups have shown steady increases during the past two months. “The Merino prices have moved up between 1.5 per cent and 3 per cent across the last 20 auction days. Crossbreds have been the standout gaining around 15 per cent of their early May lows,” he said.

Mr Avery said the forward market was trading at 1455c/kg for 21-micron wool in October, a 10 cent premium to the spot market.