The fall steadies but no light in the tunnel – Mecardo

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Wool producers did their best to support the market this week; of the 40k bales rostered only 35,700 were eventually offered for sale with a further 5,900 passed under grower’s reserve. Despite this, the market again fell.

2018-11-2 Wool Fig 1

2018-11-2 Wool Fig 2

2018-11-2 Wool Fig 3

The Eastern Market Indicator (EMI) fell 20 cents on top of the last two week’s 149 cents fall, to end the week at 1,854 cents in AU$. The Au$ rose almost ¾ of a cent; the EMI in US$ terms fell by 5 cents to end the week at 1,322 US cents (Table 1).

In Fremantle, the Western Market Indicator (WMI) lost ground, falling 28 cents on the back of the last two week’s 137 cents falls to end the week at 2005 cents.

Compared to the original roster posted last week, less than 75% of the 40,000 bales intended for sale this week were in fact cleared to the trade. Growers passed in 16.6% or 5,970 of the 35,784 bales that were finally offered for sale. This resulted in a clearance to the trade for the week of 29,814 bales, 3,500 more than last week.

The dollar value for the week was $62.06 million, for a combined value of $1.17 billion so far this season.

In the auction weeks since the winter recess, 427,179 bales have been cleared to the trade, 91,600 fewer than the same period last year. The average shortfall cleared to the trade compared to the same time last year continues to grow and now sits at 7,050 bales per week fewer (Figure 2).

Of note is that over the past 3 weeks the EMI has fallen 169 cents or 8.3%, while the clearance to the trade has been 45,000 bales fewer than the same period last year.

This is a serious correction with the EMI giving back 12% since it peaked mid-August at 2116 cents.

19 MPG and broader types while also easing have been less affected, with 19 MPG and finer not only feeling the brunt of the general market correction, but also the increased volume of drought influenced fine wool has tested buyer’s capacity.

Cardings have plummeted in recent weeks, going from being the “star” performers to now almost unwanted. The Melbourne Carding indicator has fallen from the August peak of 1558 to this week close at 1116, a 28% retracement. Despite the more affordable price, 25.5% of offered Cardings did not reach growers reserve, with only 3,819 of the 5,120 bales offered sold.

The week ahead

According to the AWEX roster, the next three weeks less than 40,000 per week are predicted, with 35,600 bales next week. Growers have decided they are comfortable holding wool so its unlikely this number will get to the auction next week.

While this week the fall was reduced compared to the past two weeks, it is still too early to call the bottom of this recent correction.

Source: Mecardo