August 2013

As we kick off another wool selling season, I would like to bring you up to date with a few relevant issues which affect you. Some of these are ongoing from previous seasons, and others involve new initiatives we are involved with.
What better place to start than the wool market. Possibly, one could argue that the weather is a better topic to kick off a newsletter with, but the reality is, that conditions are not good everywhere. Whilst the South East, the Central West and much of the Western Division are having their best winter in years, the North West areas around Wee Waa, Burren Junction, Walgett and beyond are not. Some have not recorded a decent fall of rain in a year. This phenomenon was the case in the Central West the year before where some places registered their lowest rainfall in a 12 month period in recorded history. On the other hand, the mild temperatures, even on the Monaro, have allowed for some winter pasture growth not often seen.
So, back to the market, and whilst it is relatively steady for now, we are all anxiously awaiting a return to the heady levels we saw in July 2011. The reason we compare today with July 2011, is because that was the best the market has been since 1989, and has become somewhat of a modern day “bench mark”.
In saying that, some parts of the market are even better than they were in 2011, and others are not. The carding market for example is currently running at an all time high, with the Merino Carding Indicator (MCI) currently trading at 836 c/kg (at the time of writing), 277 cents above this time a year ago, and 142 cents above the three year average, and 294 cents above the ten year average. This places it in the 100% percentile. In other words, the price has been at 836 cents or lower than this for 100% of the last 10 years. In more simple terms, it's never been better. The broader crossbred types are also in the 90's in terms of percentiles, meaning for most of the last decade, they've been lower. This is a useful tool when determining if it's a good market on which to sell. Crossbreds, crutchings, locks, short lambs, and even short (prem shorn) fleece types are as good as ever. Conversely, the finer fleece types, such as 16 micron are trading at the 45th percentile, meaning they've only been lower than now for 45% of the last 10 years, and over three years are at the 11th percentile. Some justification then for those holding their fine fleece.
The more recent market has brought about some encouraging signs. This leads me to the first of the initiatives we have been part of. In week 5 of this year (the third and final week of the winter recess), Auctions Plus conducted the first ever electronic auction undertaken in a sale recess. This was brought about as a result of Buyers wishing to retain their three week break, but sellers (Brokers and Growers) pushing to have the recess reduced. To offer an Auctions Plus sale was seen as a compromise, and a first step in trialing what could be achieved. Jemalong Wool was the largest contributor to this sale, offering around 1300 of the 6000 bales. About 75% of the offering was sold, and whilst AWEX were unable to “quote” the market, prices realized were generally 15 cents up on the close of Sale week 2. Some better types were 30 – 40 cents dearer. From our point of view, this sale was a resounding success, as it achieved two things. Firstly, there was 6000 bales offered that would otherwise have been offered in Sale 6, the first auction sale back from recess. Sale 6 therefore offered a more manageable 49,000 bales. This gave the opportunity for the market to open on a firm footing, rather than be crushed by having too many bales for the trade to handle in the first sale. Secondly, it gave the grower an extra sale opportunity, and thereby “shortened” the recess. Internally, there were some administrative issues which need to be sorted out, but nothing insurmountable, and we would be keen to conduct a similar sale when the time is right. We decided that we would absorb the cost levied on us by Auctions Plus so those participating were not disadvantaged.
Another new program we have undertaken in the last year is the introduction of the Riemann Wool Forward Contract. Wool producers generally are far more ready these days to take a forward price than they once were, and there is simply no easier way to do so than with this system. It is a cash settled contract trading only the market level itself. Everything about selling wool is unchanged. We held a series of seminars earlier in the year, to help growers understand how to take advantage of this system of price risk management, and whilst the response was disappointing on the Monaro, Forbes and Tamworth embraced the concept enthusiastically. Always the optimist, Maxine still managed to conduct a mini seminar for those who were interested in the wool store at Cooma.

One of the most exciting developments this year is the introduction of Mecardo. This is an online news and market reporting service available through the Jemalong Wool website. You can access markets and news on Wool as well as other commodities, online. Whilst this service is not free, you can utilise a one month complimentary subscription to take it for test drive. I would encourage you to take up this free trial offer, and just see what is available.
On the down side, we ask that you constantly continue to strive to meet bale weight and length limits. We have already had fines from carriers passed onto us for over width loads as a result of bales being pressed over length, and overweight bales continue to be a major problem for our receival staff. AWEX have now completed their trial of some 1800 new packs, and release is about to begin. The new style of pack should be available by the end of the year. By changing the stitching design and by marking on the bale where to place the fastener, the packs should be squarer and have less bulge on the bottom.
We are constantly aiming to be at the cutting edge when it comes to marketing options. Between selling every auction week in Sydney, utilizing Wooltrade more than any other broker, Auctions Plus or a Riemann Forward Contract, we are sure we are providing the best marketing options available. In order for us to maintain this momentum, we need, this season, to adjust our fee slightly. It is two years since we altered our rate, and as is usually the case, we have again fallen behind in terms of CPI. Our flat rate for this season will be $32.50. The reoffer fee will be $10.50 per lot for the third and subsequent auction offering. This is simply a partial cost recovery mechanism from what we are charged by AWH, and is rarely invoked, as most sellers utilize Wooltrade and Auction, and effectively avoid this fee. Our interlotting, reclass, small lots, insurance, handling and warehousing, are all still covered by the flat rate.
We wish you all the best for the coming season, and look forward to the market continuing an upward trend as we head into spring.