Upcoming wool supply concerns stir prices

Wool supply concerns erupt


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Low storage supplies is expected to see less than 100,000 bales offered offered on the physical market in the next three weeks.

Low storage supplies is expected to see less than 100,000 bales offered offered on the physical market in the next three weeks.

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WOOL buyers’ concerns about supply for the remainder of the season are raging as the forecast national offering dwindles.

Aa

WOOL buyers’ concerns about supply for the remainder of the season are raging as the forecast national offering dwindles.

Extraordinary prices this season has limited the volume of wool in storage, while seasonal conditions has delayed shearing. The result is less than 100,000 bales expected to be offered on the physical market in the next three weeks.

“My opinion is that you can’t eat wool,” Pastoralist Russell Nield, Benilkie Station, Balranald, NSW, said.  

“When prices are high, you’re silly not to sell.”

Mr Nield and his wife Suzanne are preparing to market a proportion of their 19 to 21.5 micron wool clip across seven auctions.

After shearing in Spring, the Nield’s store their bales for up to eight months, to capitalise on the wool supply drought experienced in autumn.

“I think the market is always a lot more stable in the second (part) of the selling season, from January to June, when there is less wool around,” he said.

Their patient move is likely to pay dividends, as the market soared 43 cents a kilogram on the back of a reduced national offering last week.

The country’s four major wool buyers exerted extreme buyer power, thrusting the Australian Wool Exchange Eastern Market Indicator (EMI) to hit 1544c/kg, as short supply failed to quench demand.

There were nearly 14,000 bales less offered, following a post-Easter rush, as a new standard of about 35,000 bales weekly is expected to close the season. 

Low storage supplies is expected to see less than 100,000 bales offered offered on the physical market in the next three weeks.

Low storage supplies is expected to see less than 100,000 bales offered offered on the physical market in the next three weeks.

“Can you ever get prepared for a change in wool supply?” Southern Aurora Wool’s Michael Avery said.

“There is not any preparedness on behalf of exporters or brokers that could have solved this problem.

“We are going to have a shortage and on balance, that is one of the causes of the market pushing up.”

While restricted supply was as definite, Mr Avery said how the market would react was unknown.

“Very high prices can restrict demand… whether the lower demand balances out with lower supply, we don’t know until it happens.”

He said the astonishing prices had stirred a cautiousness among woolgrowers and buyers.

“Growers are accepting the record high price in spring, but the flip side to that coin means exporters have to accept record high prices and they’re not getting that message of approval from clients at the moment,” Mr Avery said. “That is why there is a large backwardation.”

He said spring hedge levels had broken new ground in forward wool markets. fetching 1430c/kg for 21m – a discount of 100c/kg to the physical market.

“Historically it is a price that has never been achieved for August to December period,” he said. 

“Exporters of course are looking at the exact opposite of the discount, they’re seeing the record level, and what is their customer going to say? They’re going to wait for bigger supply to see how the market reacts.” 

The six-month shearing trend is also impacting some buyer options, according to Techwool Trading southern region wool manager Ken Welsh.

“There is a sea of short wools on offer, good full length wool is scarce – the selection is both low and limited,” Mr Welsh said. 

Traders reported strong purchasing interest from India, whereas China “chops and changes” with price levels.

“It is hand-to-mouth buying for everyone.,” Mr Welsh said. 

The story Upcoming wool supply concerns stir prices first appeared on Farm Online.

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