Market Morsel: Wool springs into life

Fibre | 18th September 2020 | By Andrew Woods

Market Morsel

Despite weakness in Melbourne prices late last week, the greasy market enjoyed strong rises this week, finishing 7% higher fairly well across the board. Exporters need to buy for prompt shipment, pushing prices higher on low offer volumes.

Encouragingly new business was reported late in the week after the increases in auction prices. This points to another good market next week. Interestingly grower offerings have not responded to the higher prices. It seems likely the normal seasonal pattern of increased spring offerings will dampen the market especially when the need for prompt shipment eases.

As far as the down cycle caused by COVID-19 goes it is too early to start calling the bottom of the cycle as more information is required and the pandemic persists in the major markets for wool, but it is encouraging to see an early spring rally. One of the challenges with the pandemic is that it is different in that an external health shock is causing an economic downturn, something not seen for a century, so no-one is sure of the likely pattern of behaviour in prices.

The 17 MPG bounced this week, as did the market generally. Fine micron premiums seen in combing wools are being replicated in carding wools, up from very little if any premiums a year ago. The spread in price between the 17 and 21 MPGs look to have more to widen between now and next autumn.

Strong forward bids and reports of new business late this week point to more rises in price next week. If the squeeze in the market persists the 19 MPG could have a rise to around US900 cents, with subsequently increased volumes likely to quickly pull prices lower.

The greasy wool market has had a huge fall in price in 2020, with the COVID-19 down cycle tacked directly onto the 2018 down cycle. Volatility works both ways so, the current rally may surprise on the upside in the short term as price regains a small part of recent losses. Given the method of sale you need to have wool rostered in sale to be able to take advantage of any such rally.

Provided by Elders Wool. Prepared by Andrew Woods (Independent Commodity Services) with contributions from the Elders wool team.

Tags

  • Wool