Record high prices allow for extreme falls

Record high prices allow for extreme falls


Sheep
The Eastern Market Indicator finished the week at 1513 cents a kilogram.

The Eastern Market Indicator finished the week at 1513 cents a kilogram.

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Wool prices continued to fall last week, following the previous week's strong correction.

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Wool prices continued to fall last week, following the previous week's strong correction.

Confidence remained low across most industries, with Thursday seeing the Australian Securities Exchange's worst day of trading in 18-months.

This was reflected by the Eastern Market Indicator (EMI), which finished the week at 1513 cents a kilogram, down 163c/kg or 9.73 per cent.

In US dollar terms this equates to US1026c/kg, down US109c/kg.

It was reported that this week saw the highest weekly fall since 2003.

Interestingly, the current EMI of 1513c/kg remains 17c/kg above the five year average Australian dollar EMI of 1496c/kg.

While price falls have been dramatic, recent record high prices have allowed for falls to be so extreme.

A looming trade war was the main driver of negative sentiment, with prices dropping dramatically across all microns.

The week finished with a 28.6pc passed-in rate for the 45,000 bales on offer.

Reports from the physical sale suggested confidence had diminished off the back of a slowing global economy.

The weakening Aussie dollar did little to boost export activity, as consumer demand for premium products continues to drop in the face of economic uncertainty.

Manufacturers have begun to slow down production in anticipation of this.

The 20 to 21-micron wool saw the largest drops, being the most popular amongst these mills and manufacturers with prices falling more than 200c/kg for the week.

Finer wool grades demonstrated the most resilience, with 17-micron wool dropping by 117c/kg in Sydney, to finish the week at 2000c/kg.

With prices dropping and no clear way to pick where it is heading, many growers withdrew lots prior to auction, reducing turnover.

Specifically, 16.7pc of lots were withdrawn prior to sale, significantly reducing the expected offering.

This week will see 33,696 bales go to auction across Melbourne and Sydney.

Looking online, AuctionsPlus has 8600 bales on offer, with almost half of those arriving online in August.

Perhaps in this circumstance, growers are looking to set their own reserves in rejection to current market prices.

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