Confidence amid the volatility

Early opening wool sales for 2012 had strong gains last week but on Thursday prices were easing, especially in WA.

The volatile Western Market gained 50 to 60c/kg on Wednesday for 18 to 20 micron wool, only to drop 30 to 40c on Thursday.

Australian Wool Industries Secretariat Peter Morgan said the market opened strongly after the Christmas break when the AWEX Regional Indicator finished 2.1 per cent higher.

Dr Morgan said the strong demand for Merino fleece lost momentum by Thursday, but the price falls, which were the greatest in WA, were not enough to cancel out earlier gains in the market.

He said that after last season's large price rises between January and June, the same margins were less likely to occur during the same period this year.

"The Eastern Market Indicator, currently at 1216 cents/kg clean, is 64c/kg higher than in the same week last year while the season average of 1232c is 291c higher than the season average at the end of week 28 last year," Dr Morgan said.

Arthur River wool producer and Merino stud breeder John Clarke and his son Andrew, who traditionally sell their clip in the first weeks of January, were not surprised prices had held up from last year.

"With the lack of sheep numbers we would have been surprised if prices were not higher," Andrew said.

Their 278 bale offering at Spearwood last week all sold to a top of 1180c/kg greasy for one bale of 14.9 micron fleece wool, topping the Elders sale catalogue.

Another AAAM six-bale allotment of 17.3 micron November-shorn Brookdale wool sold for 1166c/kg and was described as a best top making line by Elders technical manager Danny Burkett.

Wool classer Eddie McEllister said it was rewarding to see growers have good results for their wool prices, especially when working off dry seasons when wool could become tender.

Boddington woolgrower Adrian Fawcett, sold wool to a top of 1230c/kg greasy for one bale of 16 micron fleece wool last week through Viterra.

The Merryville-based Mokine clip's topper was a few hundred cents below last year because it was grown in an extra-dry season.

"Prices are holding up otherwise," Adrian said.

Andrew agreed and said it was a good time to be a wool producer.

"While wool supply is well down, the appreciation for quality is the key," he said.

"Buyers are realising the superior performance of processing wools."

The Clarke family is confident of returning to higher sheep production numbers on the back of improved seasonal conditions.

"We had to sell off about 20 per cent of our flock," Andrew said.

"More work is now being done to make sure every ewe on the farm becomes pregnant."

Mr Burkett said supply was still the major issue in the wool industry.

He said the two events in the past decade that had reduced demand and therefore supply had been the 1997-98 Asian financial crises and Hong Kong's Severe Acute Respiratory Syndrome (SARS) outbreak of 2003.

"Wool is on the comeback through the growing wealth per capital in China," Mr Burkett said.

In Landmark's Wool Weekly report it said overall, wool prices have held up better than competing fibre prices.

"This has meant that wool's price competitiveness with other fibres has slipped," Landmark said.

The report said at the start of 2011, 21 micron wool was 2.77 times the price of cotton.

"By the end of 2011, 21 micron wool was 6.35 times the price of cotton, the highest average in more than 4.5 years," Landmark said.

"Wools poor price competitiveness against other fibres will be an important factor in wool demand in the next six months."

Dr Morgan said this week's wool sales include a large offering of 57,783 bales followed by 42,800 and 38,600 bales respectively which is a decrease of 11.4 per cent over the three sale period when compared to last year.