The Australian wool market is back on track after a five-week winning streak for growers in the auction room.
Key points:
- The Australian wool market is now 309c/kg higher than the same time last year
- The AWEX EMI has lifted for five consecutive weeks
- Processors from China are scrambling to secure wool before the Australian wool auctions go into recess for three weeks in July
The Australian Wool Exchange Eastern Market Indicator (AWEX EMI) is now trading at 1,448 cents a kilogram, which was 309 cents a kilogram higher than the same time last year.
Clearance rates were also good with just 4.6 per cent of the 42,496 bales passed in at auction between the three selling centres at Sydney, Melbourne and Fremantle- which meant almost $70 million worth of wool was sold.
The big winners have been fine wool growers with 17-micron wool and finer clips commanding above 2,500c/kg.
Rush to buy before market recess
Southern New South Wales wool broker Marty Moses from Temora said an emerging trend was some urgency from China as the wool buying season comes to an end and the three-week July recess for auctions loomed.
"Chinese processors are trying to get ahead of the curve and get stock on the water," Mr Moses said.
"The Chinese seem to be enjoying our wool and are willing to pay, so let's hope that continues."
China is still the biggest buyer in the room, so far for 2020/2021 securing 85 per cent, about 196 million kilograms (Mkg) of the Australian wool clip.
A long way behind is the Czech Republic which has purchased 4pc (8.4Mkg) of the clip; India 3pc (7.6Mkg) and Italy 2pc (4.9Mkg).
Mr Moses said wool was now flowing onto the market after farmers were delayed from shearing at their regular times during the COVD-19 travel restrictions, when New Zealand shearers were unable to come to Australia.
He said wool previously passed in at auction was reoffered in the higher market.
The reoffer percentage of 7pc for fleece wool in the Sydney and Melbourne markets and 13pc at Fremantle.
With only Melbourne and Sydney auction rooms in action this week it was anticipated the EMI could lift further, as the national offering was reduced to 34,600 bales.
"The market is starting to get back to this really profitable level, in particular for the fine and superfine wool," Mr Moses said.
"It's such a volatile market environment that it could even get dearer, it's a pleasant surprise to see that EMI around the 1450 mark, I didn't think it would get there," he said.
Boost for growers rebuilding flocks
The northern New South Wales region of New England is well known for its superfine wool growing.
After years of drought and volatile prices, growers were welcoming the buoyant market alongside good seasonal conditions.
Walcha superfine wool grower Martin Oppenheimer said the lift in demand was good news for growers.
"It will make a massive difference, particularly in the New England, because most of our merinos are fine, superfine or ultrafine and that's where there has been a big lift in the market," he said.
Mr Oppenheimer believed the constant demand for the fibre and the lack of supply across the industry would bolster prices for some time.
However, due to years of drought merino ewe numbers had declined, and as a result, so too had wool production.
While numbers of merinos were stabilising following the drought, there was still limited wool available to supply the increased demand.
Mr Oppenheimer said flock numbers were the biggest hurdle the industry had to overcome.
"The potential growth we're seeing in sheep numbers in the national flock is coming from the non-merino ewes, so we have got a problem with supply," Mr Oppenheimer said.
Meat and Livestock Australia projected the Australian sheep flock would grow by 6.3 per cent in 2021 to 68.1 million head.
This follows the flock falling to its lowest level on record in 2020, at 64 million head, after years of drought.
By 2023, the flock is expected to be 75.4 million head.