Curtis Wool Direct

Australian Wool Market – AWI Commentary

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Australian wool auctions this week followed along the same trend as has been seen for the past two or three weeks. Super fine and fine Merino types remain well sought after whilst the medium Merino types continue to drift. Crossbred wools are still struggling to find a stable level of trade, but the carding sector is enjoying good times and prices continue upwards under strong demand.

Within all these minor adjustments to wool values, the AWEX EMI (eastern market indicator) barely moved and concluded the series of sales this week at 1522ac/ clean kg or 3ac lower. Those buying in USD (US Dollars) were the major beneficiaries of the week’s activity with the USD EMI 2% lower at 1189usc/clean kg. This reduction was due almost entirely to the USD v AUD forex (foreign exchange) rates being favourably lowered by 1.9% week on week.

Rather than the AUD being weak, it was the strength of the USD against the AUD and most other major currencies that produced the significant change. Due to public holiday schedules differing across the Australian states this coming week, auctions were staged over three days, which in some ways helped the relative stability of pricing as only Wednesday was loaded up with quantity.

The wool buyer’s approach to the week could be described as cautious as most exporters appear to be operating to careful price sensitive strategies. Under this purchase method, it is more the price of inventory intake, rather than volume that is the priority. Sentiment remains positive and new business is seemingly available in adequate volume to maintain the current market, but the risk appetite profile of exporters to take on forward sales without coverage is low. As the industry finances are being stretched, risk taking takes a back seat, as many trading participants predominantly focus on and service their major client’s immediate needs. The aim is to turn sales over safely, even at perceptively low profit margins.

The current late winter/spring has failed to produce any significant rain across most or our wool growing areas, so the drought conditions continue to worsen daily. While the current shearings are producing very nice wool clips, albeit with growing Pobm (position of break in the middle) readings, the further into the spring/summer shearing the strength and yield readings are also likely to fall away, but Pobm results will get better the closer to Christmas/New Year we get.

Presently, in the superfine area we are seeing discounts of up to 80ac clean kg for high Pobm readings (roughly 75pobm and higher), and in the 19mic and broader area up to 50ac/clean kg. The longer (100mm plus) wools are most affected as they produce a progressively larger CVH% (co – efficient of variation in hauteur %) result.

Merino fleece types within the 20 micron and finer area gained a general 20ac/clean kg for the week, whilst conversely 21 micron and broader fell away by 15 to 20ac/clean kg. Skirtings followed the pattern of their Merino fleece counterparts and the Merino carding sector continues to strengthen daily and by week’s end a decent 25 to 30ac was added to their values. Crossbred types and descriptions struggled to maintain their level for 28 micron and finer, but wools broader than 28 micron fell by 15 to 20ac.

Next week in Australia we have 40,500 bales scheduled to be offered. Similar operations and sale results to this week are expected as next week is considered the last week which allows fulfilment of September shipment commitments. Some minor instability may occur as buyers fill outstanding orders and then reassess their forward positions.

Source: AWI

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