Weekly Market Wrap
With Adrian Field, Melbourne
Assistant Trading Manager
June 13, 2003
Broad wool continues to close the 'gap'
The eastern market gained another 12 cents per kilogram this
week to close at 932c/kg.
Most significant demand was for 22-26 micron wools, where
some fleece types were up 40c/kg.
The finer end was not so fortunate, with most wools falling
about 20c/kg. There is now little difference in price between
23 and 19.5 micron wool types.
The majority of the clip for auction is now finer than 20
micron, whether it be due to breeding, the drought conditions
or a combination of the two.
It was not that long ago (about six years) when the majority
of the clip was made up of about 23 micron wools. Most of
the wool within the former stockpile was also in the 23 micron
range, and I can recall concerns regarding the make-up of
the clip's content. It was suggested that there was far too
much broad Merino wool making up the overall content. At that
stage, prices were very low for 22-26 micron wools - much
lower than that of 20 micron types and finer.
Wool is no different to any other commodity and the basic
rules of economics apply - the price generated will always
relate to levels of supply and demand.
Prices are now reflecting the fact that there is an abundance
of 19 micron wool available and a very small amount of 22-26
Many importers of Australian wool are very traditional in
their requirements, whereby they use a certain type and micron
For those who use 22-26 micron types, they now have much
less to choose from. What happens if they have to compete
with other importers to acquire their share? You guessed it
- they are forced to pay more.
For those who traditionally import 20 micron and finer, the
volume on offer is now far greater, and there does not appear
to be any real concern in obtaining annual requirements, hence
prices paid are not at the premium they used to be.
As mentioned earlier, the overall supply change has been created
by changes in breeding objectives as well as severe drought.
Many large pastoral clips in South Australia and New South
Wales have lost massive numbers of stock due to the drought,
and most of them are traditional broad Merino clips.
Three to four years ago we experienced a huge swing across
to fine wool as prices for broad wool at that stage did not
appear sustainable - they had been severely discounted for
years. There was a huge push to get into fine wool, and, unfortunately,
many people have since suffered.
The finer wool animal has struggled in areas where the larger,
broader wool sheep once thrived. Not only has the animal suffered,
but the cut per head is less and the quality of the wool is
The larger Merino is also much better for breeding fat lambs
and we all know what the lamb market has done.
At the end of the day, it's easy to now lay some blame, but
one would have to question the radical promotion and push
toward growing fine wool in the traditional broad wool growing
Each producer is ultimately responsible for making a decision
on which direction they should take when it comes to growing
wool, however the producer's main task is to grow the wool
and they should feel reasonably secure knowing that information
they receive from the so called 'experts' (who are funded
by the grower) is reliable. This was highlighted this week
by the expert announcement that "the drought is over''
- what country are they referring to?
Admittedly, there is now less overall demand for wool and
the demand that does exist is generally more for finer products/fabrics.
But there will always be a market for broader wools from
Hopefully traditional pastoral clips will stick with what
works best and we will see the resurgence of the medium and
strong wool Merino - providing the drought ends soon.
Although prices may seem low for fine wool, they are not too
bad in relation to prices over the past decade. The broad
wools have just gained so much and are returning very good
We can assume that better style fine wools will begin to
improve later in the year, when overall demand for wool requirements
starts to pick up.
Demand this week was largely due to the combination of small
amounts of fresh business and another small offering
There should not be much change next week, as the volume of
wool allocated for sale is again very low - a fraction over
24,000 bales Australia-wide.
Melbourne is holding a one-day sale - for the second time
in three weeks.
The market is likely to continue to hover around these levels
heading into the selling season break, but, again, its level
will depend on volumes allocated for sale, how much new business
is done and currency fluctuations.