September 21, 2007
September 21, 2007 - Australian wool auction offerings were strongly down in the first two months of the 2007/2008 season year-on-year. Auction sales moved closely with auction offerings. Australian wool supply is expected to fall by 11 percent in the 2007/2008 season and these first two months are consistent with this.
In July and August, Australian auction offerings totaled 30.4 million kilograms clean, equal to a fall of 22 percent year-on-year. In greasy terms, auction offerings were down by 21 percent year-on-year, with the difference explained by a one percentage point fall in the average yield in the first two months of the season compared to the same period last season. Offerings of most microns were down year-on-year, except for superfine (17.5 micron and finer) offerings, which were up 11 percent (in clean weight terms) year-on-year, and offerings of 32 micron and broader wool, which were up by 0.5 percent to 9 percent year-on-year. The biggest drop in offerings was for medium wool with, for example, 22-micron wool falling by 39 percent year-on-year. Eighteen micron and 19-micron wool offerings were down by 5 percent and 17 percent, respectively, on a clean weight basis.
The fall in auction offerings can be partially explained by a fall in Australian shorn wool production, as indicated by the decline in Australian Wool Testing Authority (AWTA) test data. The number of wool bales tested by the AWTA fell by 9 percent overall compared with the 21-percent fall in auction offerings (number of bales) in July-August 2007 year-on-year. The volume of 19-micron wool tested fell by 1 percent year-on-year compared with the 16-percent fall in auction offerings and 22-micron wool fell by 30 percent compared with a 38-percent fall in auction offerings.
The larger fall in auction offerings can be explained by low levels of carry-over stocks of grower wool in-store and growers waiting for higher prices or a better idea of the prices that they can expect for the season. Prices were volatile in the first two months of the season; they fell, then rose, then fell again to be below the price in the first week of the season.
For the 2007/2008 season, Woolmark expects that Australian wool supply or auction offerings will fall by 11 percent year-on-year due to a fall in production and a run down in grower stocks last season. The Australian Wool Innovation Production Forecasting Committee (AWIPFC) has forecast that Australian shorn wool production will fall by 4 percent year-on-year in the 2007/2008 season.
Therefore, the greater fall in offerings relative to production for July and August match forecasts. The greater fall in offerings and production in July and August relative to the full year is consistent with expectations from the AWIPFC that production will be more affected by the drought in the first half of the season. Reprinted in part from WoolXpress