The Northern Region wool auction broke through a perceived price barrier yesterday to help set a new national record with the Australian the Eastern Market Indicator (EMI) soaring to 1439 cents a kilogram (clean).
NSW’s Yennora wool auctions cracked a former level of resistance, rocketing 19c/kg to close the regional indicator at 1509c/kg on Wednesday.
Victoria’s Brooklyn wool auction remained unchanged despite the Australian Wool Exchange (AWEX) reporting some weaknesses appearing in fleece types.
The accumulated effect of the northern and southern region results since wool auctions resumed last week to roaring demand has spiked the EMI a further 84c/kg this year.
In Western Australia, the fine edge of the Fremantle fleece selection strengthened while the medium to coarse offering experienced a slight correction to influence a 7c/kg fall on the regional indicator to 1491c/kg.
Wednesday results followed frenzied buying of finer wools at Broooklyn, Melbourne on Tuesday which first cracked the 1425c/kg price record which was set in June 2011 by 6c/kg.
The EMI in US dollars also broke the previous high price by 10c to finish at 1071c/kg on Tuesday.
The surge has meant Merino carding indicators have hit new record prices and most micron categories of Merino fleece have gained more than 100c/kg.
The 15- to 18-micron range is where the big increases have been. Yet, in a display of how low the ultrafine price was, 16.5-micron wools are still 652c/kg behind the 2011 highs. Likewise, 17- to 18-micron wool also remained below the 2011 highs by 300c/kg.
The 18.5- to 28-micron wools, meanwhile, were selling on par with 2011 prices. Compared to 2011, the market had more wool in these broader categories, which with the stronger Merino cardings indicator, has given the current EMI its strength.
Australian Merino Exports director Chris Kelly said while prices were like 2011, the market dynamics were dramatically different. In 2011, the double-faced fabric trend was developing and flared prices for medium micron wools, while drought conditions caused an oversupply of fine wool. Since then, lower prices for fine wool has seen an exodus of producers and heavily contracted supply at a time when the finer fibre is returning to popularity.
“After several years of fine wool growers exiting the industry, now the last man standing will do well out of this,” Mr Kelly said
He said there had been a change of demand and requirements with customers wanting “finer, lighter, softer” wool.
“We are seeing limited offerings of those finer microns and it seems growers have taken the prices prior to Christmas so we are sitting here mid-January and not seeing the fine wool volumes we traditionally would,” he said.
“Overseas customers want it and need it, so supply and demand are hitting home.”
He said the wet conditions last year also increased vegetable matter content making it harder to source the specifications customers sought.
During the recess, the US exchange rate dropped 72c before recovering to last week’s closing level of US74.62c, but Mr Kelly said the market was being driven by concerns over fine wool supply rather than currency fluctuations.
“The current prices have caught a lot of people by surprise, so some customers would like it to be cheaper,” he said.
Australian Wool Exchange senior market analyst Lionel Plunkett said it remains to be seen whether there would be any buying resistance, because last year 1500c/kg, on 21m, was a sticking point.
“It was a strong market so that would have flushed some wool out of storage, as well as shearing delays which were catching up,” Mr Plunkett said.
“It will be interesting to see whether there will be any buying resistance because last year 1500c/kg, on 21m, was a sticking point and we are approaching that now.
“In 2011, the market got to 1531c/kg for 21m before it came off the boil.”