Unsold wool stocks expected to soften prices

Will wool stocks dampen any chance of an EMI comeback?

Sheepmeat
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Australia's wool market won't see any significant rise in price until overseas competition further afield than China, returns.

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Australia's wool market won't see any significant comeback until overseas competition returns to the auction rooms.

And according to commodity analysts although Australia's stockpile of unsold wool due to the Covid driven price fall in 2020 is slowly filtering onto the market, there is still plenty of bales yet to come, which could trigger the softening of prices.

In July last year it was estimated 300,000 bales of pre-sale tested wool was sitting in wool stores around Australia, and by the end of 2020 the quota was said to represent a third of the national clip.

Rabobank's animal proteins analyst Angus Gidley-Baird said until competition ramps up further afield than China, the the industry won't have a foundation for strong demand in the system.

"There are higher stocks on farm than what we have previously seen partly due to lower prices last year and partly to better season conditions contributing to cash flow situations," Mr Gidley-Baird said.

"Our figures indicate wool receivals dropped substantially last year, but production didn't drop, which means the wool is somewhere.

"We have seen an increase of 56 per cent in stock levels at the same time last year, so we are starting to see these volumes come onto the market.

"The number of bales offered has started to pick up over the last couple of months.

"Potentially, we may have seen some of the bulk of this come through, but we will see some more volumes coming through yet."

But just how this will balance out in terms of price and current global demand could prove problematic.

One shining light is the current internal Chinese demand as consumers in China and retail demand continues to look encouraging.

"The market is still in a finely balanced situation," Mr Gidley-Baird said.

"Whilst there is good demand out of China in terms of their domestic consumption, we still have very slow European markets at the moment.

"Until they kick off, the market will remain cautious as to how far they want to extend themselves in terms of building stocks in the system.

"This leads to a prediction of a sensitive market until the vaccine is rolled out and the number of cases drops.

"After that the confidence will be in the market to purchase some of these products."

Georgia Twomey rural manager Rabobank Wagga Wagga in the Riverina region of NSW said the reasonable cropping season combined with the 2020 price decreases, resulted in producers content to hold on to their wool clips.

"They were happy to sit on it and see what the market was going to do," Ms Twomey said.

"We saw a balance of selling wool clips and cash flow situations - if they had a good cropping season they were more inclined to keep more in the shed.

"Lamb sales and breeding ewes sales have been really good and the prices for grain have been handy, so again they were able to keep their bales in the shed for a while."

Ms Twomey said yields in wool clips have increased in the region, but there has been concerns around vegetable matter.

"Getting shearers has also been a bit hard and flies are an issue - shearing management has been important to managing those fly strike issues," she said.

"But there has been big positives around how much wool people have been able to get off their sheep."

Rural manager Fraser Stewart from Narrogin in Western Australia said wool volumes coming through to the market are stable, but those producers that were in a position to hold onto clips are now selling off with the better prices.

"As shearing comes through this season growers are starting to let everything go, so pretty much hand in mouth, everything that is shorn will go straight to market," Mr Stewart said.

"In general there is more wool on-farm that would normally be held and again that is a result of what happened last year.

"With sheep prices very strong, people were able to hold that through, but as it comes off now, most people will start to clear it out."

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