Market Morsel: Quality issues
Wool quality is an issue for the market at present with water stained and heavy unscourable volumes well above normal. This is an issue for both merino and crossbred wool, with prices for the faulty types highly variable. Beauty is truly in the eye of the beholder, or in this case the exporter, when looking at faulty wool, if it has some other specifications which are useful.
The fact that auctions are a great blending mechanism tends to be overlooked when the pros and cons of the wool selling system are discussed. It is within the blending, or more accurately aggregating farm lots into mill consignments, that the usefulness of a lot can vary according to the immediate need of an exporter.
It is early days but a tendency for Chinese merino demand to be moving broader seems to be happening. If it continues this would make sense given the extreme fine micron premiums and the length of time they have been present for this cycle. The market has three sale weeks before the mid-season recess, with offer volumes in the last two weeks and the exchange rate likely to play big roles in determining price levels.
While the 17 MPG is close to its 2018 peak, in US dollar terms it has been easing in recent weeks and is now close to a support level. If prices do not find support, then a step down in price of US200 cents appears likely. Quality is an issue in the current market and makes generating quotes more difficult.
A combination of larger sales in the first two weeks of the new season, poorer quality wool and the normal slow down in northern hemisphere demand as their summer holidays approach is likely to cap greasy wool prices in the lead up to the midyear recess.
The fibre diameter of the Western Australian clip has finished broadening, which was a result of improved seasonal conditions in 2021. This will remove the increase in broader merino wool during the spring, which has been coming from the west recently, helping to shore up broader merino prices.
On a bright note for crossbred wool there were some large premiums paid for fine RWS accredited crossbred fleece this week. A total of 203 RWS crossbred bales were sold this week compared to a weekly average of 150 bales since Christmas, so the volumes are small.