Week 46: 16/05/2019
The AWEX EMI was delivered a savage blow in the form of a 59c fall closing on 1893c at auction sales in Australia this week. The largest EMI fall measured since November 2018 produced a whopping 21.7% passed-in rate from the 33,153 bale offering as sellers were blindsided by the sharp market adjustment.
Western Australian fleece was met with more noticeable resentence with 45% of their fleece being passed in. The key factors being communicated by the trade emerged last week with the lifting of the Chinese trade embargo between South African agricultural products as a result of a foot and mouth outbreak, coupled with the USA tariff increase on Chinese products, exacerbating the resistance in China of the recent price levels. It now seems that we were trading on false market fundamentals. With substantially reduced Australian Wool Production numbers, and even further degradation of the production numbers into next season expected, was the explainable offset to the end users price concern. As speculation became reality from the first lot this week, the question is has the correction happened or is this the start of a larger price adjustment in play to reinstall trade activity?
Merino Fleece saw all categories reduce price levels from 50-80c for the week, with some reduced support for the worst yielding and low strength and style lots.
Merino Skirtings fell in line with their fleece counterparts as did the Merino Cardings which lost 37-50c across the centres.
Crossbred ended their bull run with a massive correction for the week. The heaviest falls were felt in the 26 & 28 MPG’s, which lost 110c and 143c respectively whilst the 30-32 MPG’s losing roughly 25-35c.
All (woolly) eyes will be on next week’s offering of just 25,637 bales, which could see some presale reduction on the back of this week’s poor market performance. The difficulty to digest the sharp falls that occurred this week will be forgotten and acceptance of the newly formed price levels will become the norm, one hopes this will be short lived (like ripping off a band-aid). Being a wool producer (researcher), I sympathise with the wool producer that had intended to sell their wool this week but found themselves passing wool in due to the extraordinary falls. I think we have a little more pain to realise in the next few weeks as the new trading level is discovered. ~ Marty Moses