The threat of recession is real and from a wool perspective, the price risk can and should be managed
Merino Fleece continued its positive price momentum which has been building over the past four selling weeks.
Last week saw Tuesday’s market open with instant rises ranging between 30c and 46c on the 16.5, 17, 20 & 21 MPG’s whilst the remaining MPG’s rose between 3 and 14c.
Wednesday saw the Northern and Southern MPG’s continue to rise with the exception of the 18.5, 19 and 19.5 MPG which were barely maintained. Melbourne continued to sell in isolation on Thursday posting small rises in the 17.5, 18.0 and 18.5 MPG with the remaining MPG’s posting a small price decline.
Buyers are reporting reduced competition for fleece lots with high CVH (Co efficient of variation in the Hauter). Lots with over length, and high midpoint breaks in the staple make up a large proportion of the offending lots. Competition was dominated from the Australian Trading exporters and the Chinese Indent and Processors.
The EMI closed on 1341c, up 8c at auction sales in Australia this week. 47,343 bales went on offer clearing 94.3%. The steady rises experienced since the market opened coupled with the solid market performance in December 2022 has instilled a more positive vibe in the Australian traders giving them confidence to take stock forward.
This essential component of the Australian Trading Exporter ensures there is competition with the large Chinese processors and Indian and Chinese indent operators.
The AUD exchange strengthened during the week topping out at 70c on Wednesday. The EMI closed the week at 926 USc, up 5c for the week, and signalling a return back to prices experienced at the end of August 2022. Note the low point for the EMI in USc was October 2022 where it fell to 794. At the time of this report the AUD has fallen back to .69 USc.
Merino Skirtings opened the week adding 20c across the micron range. Skirtings with VM under 2% were keenly sought after, whilst buyers were more selective on the heavier VM lots. The positive emotion continued into Wednesday, adding 20c to Tuesday’s levels. Buyers remained cautious on lots with High VM, and were heavily discounting lots containing cott and colour.
Crossbred Combing wools faced one of its largest weekly offerings and thankfully it attracted competition from the large European top makers as well as the large Chinese indent operators. The local traders were also active which produced a firm to slightly dearer market in the 28-32μ MPG’s. There was some price reduction in the 26 MPG’s with some 21-23μ comeback types selling at levels very close to their merino equivalents.
Merino Cardings posted another solid performance, with Sydney adding 9c, Melbourne falling by 1c and Fremantle adding 2c. Locks and Crutchings held firm whilst some pressure was felt on the lower yielding locks and crutchings.
Crossbred Oddments remain at extremely low levels.
The news from China in regard to the relaxing of the COVID lockdowns in December reveals that things are far from normal. The closures of businesses are still happening and include banks and the processing mills.
Reports also reveal some are shutting for weeks and some for just a few days as they manage the spread of COVID. The headwinds for the wool industry remain the challenges regarding the economic recoveries of the world’s economies.
The threat of recession is real and from a wool perspective, the price risk can and should be managed. Forward prices traded this week at or close to the cash, and Moses & Son encourage their clients to have a discussion with your WTO about getting forward cash settled contract prices for your next wool clip.
-Marty Moses, Moses & Son