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Australian wool auction sales – AWI Commentary (29 November 2019)

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A tough week at the Australian wool auction sales. All types and descriptions on offer sold at levels generally 20 to 40ac lower than the previous week, apart from the carding sector which was broadly unchanged but did have minor movements both plus and minus within the category. As prices lowered, passed in rates rose and concluded at 14.2% nationally, with the majority of the wool being held back within the fleece sector of both Merino and crossbred types.

The AWEX (Australian Wool Exchange) EMI (Eastern Market indica-tor) lost 25ac or 1.6% this week to close the week at 1530ac clean/kg. The USD (US dollar) EMI dropped off even further by 2.1% as the half a percent weaker AUD (Australian dollar) assisted those over-seas buyers using USD to purchase their wool. The USD EMI closed at 1035usc clean/kg.

Sale results went to pre sale expectations, as exporters reported business as slow and very competitive pricing required to execute the price levels being offered – read low price bids.

The comparatively larger volumes on offer are certainly not helping the market maintain its levels in the present trend. Demand is seemingly steady enough to support weekly volumes of around 30k to 32.5k bale sales, but above that the price struggles to even main-tain a stable level . Whenever quantity rises above this volume, price degradation has been prevalent during 70% of sale weeks but below that volume, 100% of sale weeks have produced price gains.

The South African situation post the FMD outbreak causing a ban of wool export to China is being managed, but naturally will invariably effect the global market for wool, especially the dominant Australi-an market. This has resulted in a growing shipping backlog which has led to restrictions of available vessels.

Sensibly the industry over there has declared for the greater good, sales in South Africa will cease until the second week of the New Year. Such flexibility in their selling system must be applauded and learnt from as both the brokers and buyer/exporters from South Africa stat-ed that “the extra time required before wool can be shipped will neg-atively impact auction prices as the buyers will have to finance their wool purchases for a longer period.”

Also of significance this year to all shippers to China is that the Chi-nese New Year will fall on the 25th January. Most mills in China do not wish to receive wool from around the 20th January until 3rd February at the earliest, which effectively means anything bought uncommitted by exporters pre Christmas will need to be financed for upwards of six weeks.

On top of the above, Australia sells deep into December this year (week 25) so the ability of exporters to buy wool that week and ship is severely hampered by simple logistics and the closing/opening times of those businesses, leaving the buyers/exporters to carry over any unfinished orders through the 3 week recess. Current volatility and financial conditions will be barriers for intent of traders to carry stock.

Next week has a sale volume of over 41,000 bales.

Source: AWI

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