THE market has reacted to the 7 per cent slump in Australian wool production by lifting 18pc year-on-year.
There has been 191.4 million kilograms of first hand offered greasy wool this year, compared to 205.5m for the same period in the 2014-2015 season. The production decrease has slipped to its lowest level in more than 90 years.
Mecardo market analyst manager Robert Herrmann said the dramatic drop was due to poor seasonal conditions in the east and the ongoing move from fibre to meat production.
His analysis was reflected in the 4.8pc fall in shorn sheep numbers and a 2.3pc drop in average fleece weights.
“The continual gradual decline in people interested in growing merino wool, combined with the dry season down the east coast that has impacted wool cuts per head, are two factors that are hard to separate,” Mr Herrmann said.
The Eastern Market Indicator has jumped 195 cents per kilogram on last year, with 18-micron wool showing the most dramatic gains at 22pc, up 270c/kg from 1210 to 1480c/kg.
Last week’s national offering was up nearly 5,000 bales on the previous week at 42,612 bales with 6.7pc passed in.
The forward roster showed an increase of 7,200 bales for this week, totaling nearly 50,000 bales - up nearly 50pc on offerings last month.
Despite the good market, Mr Herrmann said people were not motivated to grow more Merino wool.
“It is hard to rationalise the exodus in to prime lambs because if a market rises 18pc year-on-year, which is what the Merino category has done, then that should be a pretty strong signal for woolgrowers that the market is rewarding them,” he said.
“All Micron Price Guides are trading above the 90 Percentile level when measured on the timeframe of 2004 to today.
“This means that for at least 90pc of the time since 2004 the market has been lower than where it is today.”
The EMI was up 1c/kg to 1285c/kg last week, continuing its track towards the 1300c/kg level.
Chinese industries performed slow for the second week of their New Year, with analysts expecting their buying momentum to return at this week’s sales.
The strength of the market has been support by the decline in the Australian currency reflected in the USc EMI up 8.35pc.
However, Mr Herrmann said the Australian dollar was only back 7pc year-on-year and was not the sole driver of the solid market.
“It is the increasing demand playing out against the falling supply,” he said.
Annabelle Beale
National Sheep & Wool Writer for Fairfax Agricultural Media
National Sheep & Wool Writer for Fairfax Agricultural Media
