The Australian wool market resumed this week, after an unprecedented event forced the cancellation of sales in Week 35. Talman, the IT company that provides system software to a large number of brokers, and the majority of buying houses, succumbed to a cyberattack that prevented access to their mainframes. This in turn meant buyers and brokers across the country, could not access the systems that they required for inputting types, generating invoices, setting buying limits, printing catalogues and the ordering out of wool. The inability to perform these vital tasks meant that the sales scheduled for Week 35 could not proceed, forcing the National Auction Selling Committee to make the difficult decision to cancel the rostered sales. Talman and other industry IT personnel worked hard through the week to bring systems back online. This was finally achieved early this week, allowing the resumption of sales across the country on Wednesday. Both buyers and sellers alike, were pleased to be able to return to auction rooms, to resume the change of ownership of Australian wool. Due to the back log of wool that was unable to be sold in Week 35, the overall national quantity naturally increased significantly, the 62,217 bales on offer was the largest weekly figure since 2008. The market opened solidly, with wools selling at very similar levels to those achieved at the previous sale (20th Feb). As the sale progressed however, prices continually deteriorated, with the lesser style lots, and those with poor additional measurement results recoding the largest falls. Across the country the individual Micron Price Guides (MPGs) fell by 5 to 84 cents for the week. The Western region recording the biggest falls. On the back of these losses the AWEX Eastern Market Indicator (EMI) lost 19 cents for the series, closing the week at 1,562 cents.

The Australian wool market resumed this week, after an unprecedented event forced the cancellation of sales in Week 35. Talman, the IT company that provides system software to a large number of brokers, and the majority of buying houses, succumbed to a cyberattack that prevented access to their mainframes. This in turn meant buyers and brokers across the country, could not access the systems that they required for inputting types, generating invoices, setting buying limits, printing catalogues and the ordering out of wool. The inability to perform these vital tasks meant that the sales scheduled for Week 35 could not proceed, forcing the National Auction Selling Committee to make the difficult decision to cancel the rostered sales. Talman and other industry IT personnel worked hard through the week to bring systems back online. This was finally achieved early this week, allowing the resumption of sales across the country on Wednesday. Both buyers and sellers alike, were pleased to be able to return to auction rooms, to resume the change of ownership of Australian wool. Due to the back log of wool that was unable to be sold in Week 35, the overall national quantity naturally increased significantly, the 62,217 bales on offer was the largest weekly figure since 2008. The market opened solidly, with wools selling at very similar levels to those achieved at the previous sale (20th Feb). As the sale progressed however, prices continually deteriorated, with the lesser style lots, and those with poor additional measurement results recoding the largest falls. Across the country the individual Micron Price Guides (MPGs) fell by 5 to 84 cents for the week. The Western region recording the biggest falls. On the back of these losses the AWEX Eastern Market Indicator (EMI) lost 19 cents for the series, closing the week at 1,562 cents.

Everyone’s patience was tested this week with a computer system running at its most basic, 62,000 bales offered while only 47,000 sold due to a pass in rate of 24%. The market was a little dearer on the first day of selling and dropped away on the second day. However, with the amount of wool offered, a fall of 19 ac/kg for the week was relatively minor. Better style wools still had good support throughout the sale, while off spec wools did drop away. Coronavirus continues to impact the main markets for Australian wool with an increase in cases causing travel restrictions, school closures and panic in Italy and Korea (hope they have good stocks of toilet paper!). Meanwhile China is determined to get on with business with government incentives being offered to manufactures who are able to return to full production quickly. Next week sees 47,000 bales rostered.

Updated: Tuesday 2 Feb 2021

Market Indicators

Micron Price Guides

		North		South
16.5m	1242	-3	1243	-3
17m	1180	-3	1180	-3
17.5m	1778	13	1778	13
18m	1529	14	1529	14
18.5m	799	0	799	0
19m	1345	12	1345	12
19.5m	1180	-3	1180	-3
20m	1243	-3	1243	-3
21m	1180	-3	1180	-3
22m		0		0
23m		0		0
24m		0		0
25m	799	0	799	0
26m	550	6	550	6
28m	1778	13	1778	13
30m	1529	14	1529	14
32m	1180	-3	1180	-3
MC	898	-11	898	-10

With one black swan event behind us the wool auctions recommenced this week. The forwards traded at a discount of 30 to 40 cents to start the week as opinion was divided on how the spot market would react to the carried over quantity from the postponed sales. 19 Micron traded at 1790 and 21 micron traded at 1750. Wool had been seeming immune to the pressures of the global economic uncertainty. This seemed to be the case again as a solid start to the auction saw the forwards push up near to cash and trade out to May. The market peaked during the afternoon after 20,000 bales changed hands in the Eastern States with 90 percent of the offering sold. With orders filling, the prices slipped into the close finishing 15 to 20 cheaper in Fremantle. Thursday saw a continuation of the slide as the price whipsaw that has dogged the market even before the emergence of the coronavirus, refuses to settle. In the 17 auction trading days since Christmas the key 19 and 21 indices have had intraday movements of greater than 30 cents on 6 occasions. Direction from here is hard to gauge. Stock and commodity markets remain nervous. From an historical point of view current prices still remain in the high percentiles especially for the medium microns. On a ten-year scale 19.0 is at 76% and 21.0 at 83%. From a more near-term perspective the five-year figures show 19.0 just over the average at 52% but 21.0 holding at 68%. With the spread between 19 and 21 again closing to 40 cents on both spot and forwards a grower hedge strategy around 21.0 looks the logical path at the moment. We expect some reluctance from exporters following Thursday’s falls but we may see interest return into the early autumn with follow up offshore demand. Anticipated trading levels for March, April and May will likely be around 1780 for 19.0 and 1740 for 21.0. This discount reflects the degree of risk exporters are needing to factor in at present.