Market Morsel: Solid again
It was another week of solid prices generally in the greasy wool market, with the odd lot being neglected. Expectations are that these conditions will persist into next week, with some concern about the week after that (the last sale week before the three week Christmas recess) with regard to financing. Continued interest in finer merino wool, despite the relatively high price levels, was best demonstrated by the forward bids for 17-18 micron, out to mid-2022.
The sheep offtake (sales of sheep off farm to abattoirs) continues at a low level which is consistent with a flock rebuilding process. The sheep offtake has spent 2021 in the 7% to 8% range, roughly pointing to a 4% increase in flock size from retained adult sheep. In addition the lamb offtake is running around 30%, some 2% below the 32% level established as a norm in the 2016-2020 period, adding another 2% to the flock rebuild. All in all the flock looks set to grow by around 6% this season (death and weaning rates allowing).
There are some big ranges in price for wool on the fine end of the merino micron distribution. In addition to the traditional wool characteristics which drive price (micron, length, strength, VM, style) the market has now added mulesing status and quality systems, with the quality systems not always interested in wool quality. It is a complex mix for pricing wool.
RWS premiums quoted for the South African market are showing up in the Australian market, albeit on a smaller volume. While South Africa is selling 2000-3000 bales of RWS accredited wool per week, Australia is selling 550 bales with New Zealand merino wool in addition.
The merino fibre diameter continued to fine up in November, driven by eastern clips as the Western Australia clip is still broadening. Supply in 2022 will therefore start to narrow the gaps between micron price levels, which remain quite extreme.
The forward market is looking to support 28 micron prices by bidding 400 cents into the second half of the season. There are growers in South America watching the market in hope as some have a number of clips waiting to be sold.