Wool bounces to record price rise

Strong Chinese demand pushes EMI to biggest weekly jump

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Wool prices took their biggest ever leap last week but will the rise be sustained if more wool flows onto the market.

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Last week's spectacular recovery in wool prices when the benchmark Eastern Market Indicator roared back through the $15 a kilogram clean barrier underlined just how volatile the market could be in coming months.

Wool prices have been in bungee jumping mode during the past month, plunging 122c in the last week of August before shooting up 170c last week, the highest ever weekly jump in the EMI.

Across the Nullabor the Western Market Indicator rose by 198c, again the largest increase since AWEX records started in 1995.

The EMI closed the week at 1535c which may be enough to encourage growers to unload wool withdrawn from sale in recent weeks.

An offering of 31,134 bales has been rostered for sale this week in Sydney, Melbourne and Fremantle.

Executive director of the National Council of Wool Selling Brokers of Australia, Chris Wilcox, Is expecting prices will bounce around in the next few months.

He said the size of last week's market hike was a surprise and history suggested buyers would react to such a large jump in prices.

The high withdrawals and pass-in rates during recent weeks had built up stocks of wool in store but overall production was down because of drought, particularly in NSW, he said.

Chinese mills operated strongly last week despite China's ongoing trade war with the United States.

Mr Wilcox said the US had applied an additional 15pc tariff on woollen clothes from China on September 1 but American importers and retailers appeared to have anticipated the move by lifting imports by around 30pc in June and July and probably the same amount in August.

China has continued its domination of the Australian wool market, buying 16.1 million kilograms or 73pc of the wool sold so far in 2019-2020. Italy has been next best with 1.8 million kg or 8pc of the market.

The state of the Chines wool processing and retail sectors should become clearer after next weekend's Nanjing Wool Market conference in Qufu, Shandong Province.

The conference attracts delegates from all over the world including Australia.

Encouraging signs have emerged ahead of the next China-US trade talks due in early October with China granting limited exemptions on some American farm goods including soybeans and pork and President Trump indicating he would delay more tariff increases on Chinese imports.

Executive director of the Australian Council of Wool Exporters and Processors, Peter Morgan, said the big falls and big rises in the wool market in recent weeks had created difficult trading conditions.

He said the vibes had been strong for a price rise last week but the size of the increase was unexpected off the back of a relatively small offering of 19,193 bales compared with 34,000 the same week last year.

Dr Morgan said the wool industry was "doing pretty well" given the enormous global economic uncertainties now putting a handbrake on spending and trade.

So far this season 240,133 bales have been offered, down 22.1 per cent compared with the same period last year. The pass-in rate at 19.4pc is 13pc above year-ago levels.

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