Wool prices hit record highs
Producers who had wool in the auction rooms last week were all smiles as market prices soared dramatically across the country.
The tone was set on the first day from the opening hammer in the Eastern States, with prices across the entire Merino spectrum increasing by 40 to 50 cents from the outset.
On Tuesday, the benchmark Eastern Market Indicator rose by a significant 46c, the largest daily increase in more than two years.
Over the week, the EMI rose by 64c to 1614c/kg, while the Western Market Indicator increased even more, by 74c to 1680c/kg clean, the highest levels ever achieved, passing the previous records set in April, 1988.
As producers swing into the busy spring shearing season or contemplate their summer clip, they have some options in how to consign their wool to take advantage of the bullish market — hold off in the hope it could rise further, sell immediately off-shears, or sell any future clip forward.
According to independent consultant Paul Swan, formerly of Australian Wool Innovation, now is an excellent time to sell if producers have bales in the shed.
“The market is currently above 10 per cent in real value,” he said.
“The supply of both raw wool and apparel wool is very tight, which is why prices have been climbing.”
Mr Swan said he tended not to give producers marketing strategy advice, but suggests woolgrowers understand their cost of production and consider hedging as a wise option, but only if they can afford to gamble.
“Wool is a wonderful commodity which can be stored safely and sold at a later date, but in the current situation, I would suggest producers sell wool-on-hand now,” he said.
“It is an interesting positive time for the industry and I would encourage producers to view their well-bred and managed Merino ewes as blue-chip stocks.
“Think of the lifetime value of each ewe, which is currently earning producers an extra $1000/head a year.
“Wool values need to be where they are as property values continue to rise, so with cautious optimism, prices should remain — however, we still are trying to understand the demand side of the equation.”
Cascade woolgrower Scott Pickering sold his eight-month shorn wool clip last week through Elders and received a farm-record top price of 1551c/kg greasy for nine bales of 18.4-micron wool.
“All 91 bales of our wool sold for a record average price of $2438/bale, which included 16 bales of oddments,” he said.
Mr Pickering said he shears every eight months and was keen to sell straight off-shears.
“With the lack of wool in the pipeline, the auction system is the best market approach at the present time versus storing wool or selling forward,” he said.
The Elders International Wool Report said the most damaging aspect of the current wool market activity was the speed of the price increase.
“When a market jumps 6 per cent or more in two weeks, people are bound to get caught on the wrong side and hurt financially, and the losses always seem bigger than the gains,” the report said.
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