Wool’s big challenges after auction recess

It’s been three weeks since wool has been sold at auction and with a backlog of offerings, prices will be impacted.

Wool growers could be in for a bumpy ride with 60,000 bales expected to test the market when auctions resume this week.

Subdued interest during the annual three-week break in auctions combined with the big offering are expected to push prices down, analysts say.

Last year, about 50,000 bales were offered at the first sale post-break, and with the benchmark Eastern Market Indicator dropping 56c/kg clean, the pass in rate was high at 33 per cent.

Australian Wool Innovation chief executive John Roberts said it was not unusual to see increased offerings after a recess, which always challenged the market.

“Fears over the (potential) impact of foot and mouth disease may have prompted more growers to list wool for sale promptly, which may have added to post recess volumes this year,” Mr Roberts said.

He said “time will tell” whether the market would be able to withstand the big offerings with competing forces impacting.

“On the upside, major brands and their consumers are still seeking out sustainable clothing and wool fits into this space well,” Mr Roberts said.

“On the downside, international shipping congestion continues to be an issue, also the threat of FMD may prompt some growers to be more likely to sell, rather than hold their wool.”

Endeavour Wool Exports is the second biggest exporter of the fibre in Australia and managing director Josh Lamb said the market would open softer for all categories.

“We are hearing from brokers that there is an element of worry about FMD from growers who consequently want to sell as soon as possible,” Mr Lamb said.

“This however is not the reason for the current large offering which is typical for this time of year.”

Mr Lamb said demand in India and Europe was good and China was usually quiet this time of year as it’s out of season for mills purchasing.

“This year seems even quieter than usual due to the affect of the China lockdown earlier in the year and the damage that has done to business confidence,” Mr Lamb said.

“Offerings over 40-45,000 bales are becoming harder and harder for the market to absorb in recent years and this year is no different.”

Fox and Lillie Rural brokerage manager Eamon Timms said the 110,000 bales to be offered across auctions in the next two weeks would test prices.

“Sales activity was somewhat subdued over the recess, at price levels business not quite at the closing rates of the sale before the recess,” Mr Timms said.

“Exporters are anticipating a lower opening.”