This week, although the chaos caused by the new coronavirus has swept through almost all markets around the world, the impact on Australian wool prices seems relatively small and it seems to have survived the catastrophe. The 5.5% weekly price drop is not a trivial matter in the past, but compared to other markets this week in this half a day to achieve this decline, the wool price in the Australian wool auction market seems particularly strong.
However, the reality this week is that the dollar has surged against the Australian dollar. The Australian dollar depreciated sharply, with a decline of more than 13%, which effectively masked the sharp fall in the actual price of wool products. More than 70% of wool is traded in foreign currencies, and all of these currencies have appreciated by 10.5% to 13.7% compared to the Australian dollar last week. In difficult times, investors flee to safety, and gold and the US dollar are currently safe havens for storing cash.
The Australian Wool Exchange (AWEX) ’s Eastern Market Index (EMI) fell 83 cents, or 5.5%, to close at 1438 cents / kg. As mentioned above, the US dollar EMI more accurately reflects the loss of wool prices. In just three days of auction, the dollar-denominated EMI plunged 181 cents, a drop of 18.4%, and finally closed at 801 cents / kg.
One does not need the foresighter's vision to predict what will happen this week. The price of most of the merino wools sold fell by more than 100 cents. It is also very obvious that, as in all other markets, the sharp decline is due to recent unexpected events of global scale, not just the special situation of the wool industry or Australia.
This week, Chinese top makers and traders exporting to China dominated the purchase list. With the exception of some professional ultra-fine wool and specific filing operations, European and other non-Chinese customers no longer appear to be interested in auctions. Despite the rapid price decline, interest in China remains strong. Sources from various sources indicate that many factories in China have now returned to a certain level since the shutdown of the Chinese New Year on January 25.
This week, as a large proportion of wool herders are still reluctant to accept the reduced price levels, according to the AWEX report, the weekly turnover rate reached 26.5%. Most of the wool shot in the stream is concentrated in the Merino wool section. As a result, more and more wool stocks have accumulated on the market. With the stock market plummeting, these stocks of wool may eventually prove to be more suitable for investment than most personal investments or pension funds.
As the fall / winter season approaches, Australia's meat market remains strong and remains at an all-time high, which is good news for well-stocked wool herders. But cruelly, this also indicates that the future wool production will face the possibility of further destruction.
This raises two issues: first, in the weeks and months before the winter, sheep that were originally producing wool will be sold to attractive meat markets; second, breeding decisions may or may High-quality wool-producing breeds have shifted to lamb breeds. In addition, the dry climate continues. These issues will continue to affect wool herders who are using recovery models as they try to develop viable livestock operations on their farms.
There are about 50,000 bales of wool planned for next week. Auctions will be held again in Melbourne within three days starting on Tuesday, while auctions in Sydney and Fremantle will take place within two days from Wednesday.