Wool falls as yields hit 10 year low

Average Merino yield drops to 10 year low as big dry continues to bite


Wool
Merino wool yields have hit a 10 year low.

Merino wool yields have hit a 10 year low.

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The big dry bites as Merino wool yields hit a 10-year low and wool values fall.

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As the Australian wool market dropped for the third consecutive week, so have Merino wool yields as the big dry continues to make its presence felt.

The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) fell 29 cents to close at 1979 cents per kilogram, clean. 

In a state breakdown, the western market indicator fell by 30c to 2127c/kg, the southern market indicator dropped by 27c to 1949c/kg and the northern market Indicator closed at 2027c/kg, 31 cents lower.

Similar to last week's offering, a shrinking supply of better style wools attracted most of the buyer's attention, finishing only 15 to 20 cents below the levels achieved the previous week. 

The largest falls were seen in superfine wool but fleeces finer than 19 micron lost between 40 to 50c.

Average and inferior lots dropped by a substantial 70 to 80c.

The supply entering the market and offered is reported to be of lower style and low-yielding wool types.

But the real proof is in the latest figures from Australian Wool Testing Authority (AWTA) showing the national average yield on Merino fleece only 63.6pc dry.

This is the lowest level in over 10 years and stems from the continuing dry conditions affecting much of the wool growing regions across Australia. 

The lower quality wool types and descriptions are expected to remain dominant in offered volume. 

Lionel Plunkett, AWEX senior market analyst, reported that buyers struggled to average the lower yielding wools into their purchases and by the close of the market on Thursday.

"It was the large reductions in these wools which was the major factor in the individual micron price guides (MPGs) falling as far as they did," Mr Plunkett said.

"On the back of these falls the AWEX dropped back below the 2000c threshold.

"The lower price levels were met with seller resistance, resulting in 12.6pc being passed in, the highest figure since November."

The crossbreds also lost ground with 26 to 30-micron types 25 to 40c cheaper.

But according to Scott Carmody, Australian Wool Innovation (AWI) trade consultant, the loss of momentum was affected by the weak market that arose out of South Africa (RSA) on Wednesday.

"Whether we like it or not, wool is traded into, and under a generally free global market and the Port Elizabeth auction saw the Cape Wools Merino Indicator decrease by 3.3pc," Mr Carmody said.  

"While traditional Chinese buyers were operating in RSA in the hope the ban would be lifted soon, the purchasing numbers appear to show that that support was wearing thin and waning.

He said the situation surrounding the import ban of RSA wool into China ultimately has proved detrimental to global wool pricing in the short-term. 

"The reality of the ongoing ban on RSA wool entering China means a huge amount of exporter finances are being tied up with wool that cannot be pulled through the supply chain and be paid for," Mr Carmody said.  

Last week 40,785 bales were offered for sale, but the cheaper market saw some resistance from sellers and 5103 bales were passed in, the highest pass-in rate since last November. 

When compared year on year, the total amount of bales offered has fallen by 176,192 bales, a reduction of 12.7pc.

AWEX reports that the value of the wool sold was $74.8 million ($2096 per bale) taking the season total to $2.390 billion ($2194 per bale).

The quantity is expected to raise this week with just over 44,000 bales on offer in Sydney, Melbourne and Fremantle, before falling to around 37,000 bales nationally in the following fortnight. 

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