Market Morsel: Finer wool steals the show
The merino micron price curve continues to rise, with the difference in price between 2 microns finer and 2 microns broader than the average merino micron currently on par with levels reached in 2011, 2002, 2003 and 1988.This is a big turnaround from the depressed levels of mid-2019.
Activity in other apparel fibres continues to be positive, providing an encouraging backdrop to the greasy merino market. Crossbred prices are at the other end of the spectrum, the more so as fibre diameter increases. The 29-30 micron category had the lowest clearance rate this week, at 68% compared to the overall average of 85%.
While new business was reported as being quieter so prices may ease in the short term, the outlook remains beyond the Chinese New Year remains optimistic. Looking further ahead into the second half of 2021, recovery in Europe and North America will be required to help maintain the momentum in wool prices. At this stage what will happen is anyone’s guess.
The fine merino categories are enjoying one of their periodic strongly rising price (premium) cycles. There appears to be scope for some more rises in fine wool premiums yet, but most of the gains have probably been made. One of the good points about this cycle is the small discounts for low strength wool, suggesting the demand is coming from the knitwear sector perhaps to blend with more expensive fibres such as cashmere.
The average merino micron is currently around 19 micron. Prices finer than 19 micron are rising, some quote strongly. On the broader side merino prices are stable, especially in US dollar terms. The 19 MPG has been range trading since October between 1360 and 1450 cents, reflecting adequate supply and still incomplete demand.
Vegetable fault (VM) will increase from now through to early next spring, in a normal seasonal pattern boosted by a good 2020 in the eastern pastoral and northern NSW regions. As such discounts for higher VM levels are unlikely to shrink, probably widening as the year progresses. The 21 MPG is currently stuck around US900 cents, a clear resistance level.
The best hope for crossbred wool is that broad merino prices start to lift (not expected in the short term) thereby dragging crossbred prices higher. In the short term there is room for crossbred prices ease in relation to broad merino prices.