A dwindling near-term supply has arguably been the decisive factor influencing the Australian wool market this week.
An indication of the tightness in supply was the fact that only one sale was held in Fremantle this week, on May 11. The volume offered at this week's sales totaled 38,606 bales, compared with 47,680 last week.
Demand has remained strong, as buyers, influenced by the tightening availability, have sought to secure their foreseeable requirements. China has remained the dominant buyer, followed by India. An increased offtake from Korea and Taiwan has also been observed, with enquiry from Europe softening.
Merino fleeces with 20 to 21 micron especially found support at the May 12 auctions. Better styles of Merino skirtings also benefited from firm support the previous day.
The Wool Exchange's Eastern Market Indicator (EMI) closed Thursday at 1,323 Australian cents/kg clean, rebounding by 17 cents (1.3 percent) from May 5. A strengthening of the local currency on May 12 limited the upturn in U.S. dollar terms. The EMI reached 1,404 US cents/kg clean, a rise of only 3 cents (0.21 percent) from May 5. Conversely, the increase has been accentuated in Euros, with the indicator in that currency rising by 47 euro cents (4.98 percent) to 990 cents/kg clean.
Crossbreds have been offered in limited volumes and prices have also strengthened, particularly for the better styles. Overall, oddment prices have moved contrary to the general trend, losing some ground.
Although the market has retreated somewhat from the highs witnessed in March, prices remain historically high. The scope for a significant correction is still deemed unlikely by many in view of the supply and demand situation. Stocks held on farms have been eroded, as high prices have prompted wool from previous seasons to move to market. In the superfine sector at least, little relief to the limited supply is anticipated before the end of August/beginning of September. Meanwhile, demand levels have remained fairly robust.
Reprinted in part from the Wool Record Weekly