The typical supply-and-demand scenario played out for the Australian wool market this week with the Eastern Market Indicator (EMI) recoiling a substantial 33 cents a kilogram (c/kg) to close at 1095c/kg.
A much firmer price-tone emerged on export markets, with the Australian dollar appreciating sharply against the U.S. currency, moving from roughly 93 Australian cents, to over 95. Offers of type 55 (21 micron) into China jumped overnight from around US$10.85 to 10.95 per kilo, greasy.
Following two weeks of price surges, it was the decline growers had feared and the price correction industry experts had tipped was in store - sooner rather than later.
Despite the price slide, the EMI still remains 137c/kg above the same time last year when it was at 958c/kg.
Australian Wool Exchange senior market analyst, Lionel Plunkett, said the 33-cent fall in the EMI was mainly on the back of weakness in the Merino fleece sector, which was about 60c/kg cheaper. He said the falls were reasonably consistent, falling by a similar amount on each day of sales this week, and those falls were widespread with all microns equally affected.
"No market, wool or any other commodity can continue to rise week after week without some sort of correction and consolidation," said Andrew Dennis, Elders national wool manager.
He said the gains of the previous two weeks were a touch unseasonal but not without precedent, and now a period of consolidation would allow time for the trade to catch their breath.
Dennis said while overall the market eased by 33 cents in local currency terms, with a stronger Australian dollar the market only fell by 13 cents in U.S. dollars.
Reprinted in part from North Queensland Register