Market Morsel: Fine premiums stretched further
The strength of demand for merino wool continued this week, pulling premiums for finer wool higher and absorbing big increases in broader merino volumes. In historic terms the difference in price between fine, medium and broad merino categories is high, with comments starting to come out of the supply chain reflecting this.
The relative cheapness of crossbred prices (very large discounts to merino) is also starting to spark some speculative buying, although this demand will be picking through catalogues in order to avoid poorly prepared lots or lots with medulated fibres.
Even burry, broader merino fleece has seen demand firm. The auction sales volume of 19 micron and broader wool for June already exceeds both that of June 2020 and 2019, and we are only halfway way through. At some stage the stretched price differences between the different micron categories is going to encourage processors to start using cheaper (broader) wool.
There has been no wind down yet in the demand for fine wool. The supply chain is back to spending as much on 16-18 micron wool on a quarterly basis as it did in 2017-2019, a period of high prices. Wool coming out of stock is keeping the per kg price at lower levels.
The 19 MPG is back to the bottom of the price range it traded in between October 2019 and March 2020, before COVID knocked commodity prices through the floor. There maybe some more upside fro the 19 MPG but this price range of 1750- 1850 cents is likely to be the upper end of this run up in prices.
The sales volume so far in June (two sale weeks) exceeds both June 2020 and 2019 sales volumes for broader merino wool. It looks as though sales will continue double year earlier levels, for the full month of June. Expenditure by the supply chain for 20-22 micron wool on a quarterly basis is back to its median level of the past two decades, which is a good sign.
At least one canny early stage processor was buying some crossbred wool this week, without having specific orders on hand but because the wool is so cheap relative to other wool categories and other fibres.