WA wool buyer pleads for more orderly sale system to benefit woolgrowers

A surge in the wool price often means there will be a significant volume of extra wool placed on the market in the following weeks which may offset any gains, according to PJ Morris managing director Peter Morris. “The question I put to the industry is whilst it is understood that it is the commercial decision of a woolgrower to sell their wool at any time or day they request, but shouldn’t brokers, acting as agents for their clients, consider more wisely informing growers of the most appropriate time to sell,” he said. “That flooding the market with huge volumes for sale will result in the market retracing the market gains made, ultimately to the detriment of their client’s returns?” Mr Morris said in any commodity market, a sudden increase in volumes for sale in the order of greater than 20 per cent would usually result in a considerable market correction. “In wool, the psyche of the overseas buyer facing sudden large offer volumes, is to withdraw from market and wait for the fall,” he said. “This does not benefit woolgrowers or any local industry participants.” Mr Morris said the February 14 early Australian Wool Exchange market report from the Eastern States’ centres was 40 to 50¢/kg clean cheaper equating to a fall of about $6000 to $7000 for a 100-bale clip. This followed the previous week’s wool sale when the Eastern Market Indicator lifted strongly to 1400¢, breaking that price barrier for the first time since July 2022. This week’s potential offset could be from the expected influx of 60,000 bales of wool expected to test last week’s price spike. “NSW-based brokers in general have been incredibly proactive assisting woolgrowers and exporters with extended payment terms and storage (negligible cost to the grower compared to the premium derived) which has allowed for maximum competition for their client’s wool from exporters representing overseas mills,” Mr Morris said. “On a regular basis, Sydney sells at a premium compared to other markets — there are only a few proactive southern brokers who have also implemented these strategies to help their wool grower and exporter clients. “ Mr Morris said in general, wool brokers in the south and west seemed oblivious to the current logistical nightmares that exporters were facing. “Melbourne, where the largest daily volumes of wool are sold, is currently the most difficult region to ship from owing to shipping delays plus packing and dumping space,” he said. “Pre-COVID, exporters were able to buy, sell and ship within a 14 to 18-day turnaround, the national average is now more than 30 days and will increase with extra volume coming onto the market from February to April. “As a result, exporters are using almost double the funds compared to three years ago to ship the same volume of wool.” Mr Morris said slow cashflow had been a worldwide problem and currently China, Australia’s biggest market for wool, was suffering its own cashflow issues as businesses were trying to recover after its COVID surge. He suggested several improvements should be considered to benefit woolgrowers, including a balanced volume of wool to be marketed weekly, improved logistics in wool dumps and packers’ ability to receive, pack and deliver. Other areas to consider were an extension of wool prompts to be reviewed either six-monthly or annually and encouragement for brokers to discuss and manage the sale of growers’ wool in an orderly fashion. “This may include using derivatives, AuctionsPlus or selling wool via a private catalogue,” Mr Morris said. “As an industry, we need to improve woolgrower returns by maximising competition through a more orderly sale system. “Those companies participating in the sale of wool should aim to minimise the negative effects of logistics and funding on the market prices achieved for their clients.”