PRICE DROPS: Baynton woolgrower Leigh Tobin sold wool at the Melbourne woolstores two weeks ago, where prices were 57 cents higher than the week just passed. He is pictured here with Elders agent Adam Millard.

Prices ease after record high

THE Eastern Market Indicator (EMI) saw its largest weekly fall in over two and a half years last week, as the Australian wool market continues on its downward spiral.

The industry benchmark fell 57 cents, closing the week at 1744 cents per kilogram.

That week-on-week drop, which came after 42,525 bales were offered nationally, is the biggest drop since June 2015.

Fox & Lillie wool brokerage manager Eamon Timms said this drop isn’t as significant as it seems, given the record highs the market is coming down from.

“Given how the market’s been rising in the last four months, in percentage terms, it’s not a massive decrease, and particularly coming off the record levels the market’s been at in recent week,” Mr Timms said.

“If this sort of a drop was seen last year, when prices weren’t as strong as they have been this year, it would have had more of a significant impact.”

He said exporters’ limited cash flow is again having a significant impact.

“Exporters are pushed at the moment, because a bale of wool is worth a lot more right now than what it was six to 12 months ago,” he said.

“They’re working with the same amount of money as they were 12 months ago, trying to purchase a much dearer product, so it is restricting their ability to do business.”

He said Chinese demand was reasonable, but not significant, with buyers sitting back as prices eased.

“Chinese demand seems to be at a reasonable level, but with the EMI reaching record levels, you’d definitely expect there to be a bit of resistance,” he said.

“When the market is already facing difficulties, throw a higher currency at it, and it’s one more factor that makes trading challenging.”

A selection of 17 micron and finer wool resisted the falling market, managing increases of five to 15 cents.

“There is a bit of an imbalance between supply and demand at the moment, supply is light, and there’s a lot of demand coming in, meaning it’s a squeeze to get the ultrafine micron,” Mr Timms said.

The selective buying impacted clearance of wool, with a 14.3pc passed-in rate being recorded, up 7.2pc on the previous week.

“Most weeks it’s more than half that, but it’s not totally surprising, given brokers had done valuations on the previous week’s prices, so growers had set reserves based on those levels,” he said.

The number of total bales offered, 42,525, is down 11,825 bales on last week.

But Mr Timms said this is due to the Australia Day public holiday on Friday, and not for any other reason.

“Wool was only sold in Melbourne over two days, on Tuesday and Wednesday, and not on Thursday,” he said.

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