The forward bids correctly called a firmer market this week, with the 100 cents rise on Wednesday (sales were a day later this week due to the Melbourne Cup holiday on Tuesday in Victoria) well telegraphed by Wednesday morning. In US dollar terms the bulk of the merino prices returned to levels reached two weeks early, before losing half of the rise on Thursday.
Exporters report downstream reactions to changes in the Four Week Forecast of auction rosterings published by AWEX. However the reactions on the buy side simply result in a changed clearance rate which levels out the volume of wool being sold.
So far this season the weekly auction sales have averaged 26,000 bales which is on par with the same period for last season. Two seasons ago the clearance for the same period was 33,000 bales per week. Since then supply has fallen so the industry is probably banking up around 4,000 bales per week, although not all of this has come into store as yet as the AWTA data shows. Given the concerns early in the season and the continuing effect of COVID-19 this looks to be a reasonable outcome.
17 micron prices were quite strong this week. The latest AWTA core test data shows 17 micron volumes were down 34% in October (down 28% for the three month period to October) compared to year earlier levels. This is a big drop in supply which will help support prices and fine micron premiums.
So far the 19 MPG has traded within the proposed 1300 to 1450 cents trading range, albeit on a quicker and more volatile schedule than anticipated. Most apparel fibre/feedstock price series looked to have bottomed out early this season and have lifted since then as have a range of other commodities. This provides more confidence that the worst of the COVID-19 downturn in prices has been seen.
While overall volumes for AWTA core tests were down in October, the 21 and 22 micron categories were the exceptions. Their volumes rose strongly reflecting continuing drift broader by the merino clip as a function of improved seasonal conditions. This will help push the broader merino discounts wider.
Forward bids for 26-30 micron are available so demand is better than anticipated. Prices for crossbred fleece were more tightly spread at auction this week than has been the norm in recent years, reflecting a need to buy and also perhaps better quality.