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Australian Wool Market Commentary from AWI (28 April 2017)

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Erratic price movements in the Merino fleece and skirting sectors and stable pricing in the carding and crossbred sector was the trend at Australian wool auction markets this week. The market in the Merino fleece initially struggled to find a level where buyers were happy to support and prices for wools broader than 18 micron drifted downward by 30ac clean/kg.

This negative trend failed to last more than a day and prices immediately moved back to the positive direction on the final day and recovered more than half of the previous day’s losses. The AWEX Eastern Market Indicator (EMI) concluded the week at a level of 1501ac/clean kg, a fall of 11ac/clean kg from the pre Easter level. A similar move of 10usc lower was recorded for the EMI when measured in USD as the foreign exchange rates of AUD v USD remained exceptionally stable since auctions were last conducted. The pre sale talk on show-floors centred around the perceived over abundance of wool being offered this past week, with at one point a figure of 58,000 bales being bandied about.

The eventual volume of 52,000 bales offered was subsequently easily absorbed by the trade, although the larger figure did give rise to some of the blame for the uneasy start. Some of industry commented that the initial price deflation was largely due to more of a human sentiment element rather than the considered demand examination that kicked in on the final day from both overseas and local participants.

A larger pass in rate of around 11% was evidenced as sellers chose to generally resist any lower price levels offered. Of most significance was that nearly 21% of the Fremantle Merino fleece offering was unable to meet the growers reserve and a further 8% being withdrawn from sale prior to auction. With the kick in the market on the final day, these protective decisions probably looked good in hindsight.

The superfine and ultra fine Merino sectors (wools finer than 18.6 micron) were unaffected by any negativity throughout and traded strongly all week. European buying was dominant on anything exhibiting the better specifications with some lower styled lots not usually included in the main buyers orders appearing to be tolerated. The market price falls then gains were centred around the lower quality wools of this type area and all wools 19 micron and broader. Once more the local trading exporters were the major buyers, but some very strong purchasing from some of the major Chinese top makers also became apparent as the week progressed.

All crossbred and carding types sold under an extremely stable environment, and particularly odd given the erratic nature of the Merino fleece and skirtings market. Next week at Australian auction sales there will be around 40,000 bales on offer with all three selling centres in operation.

Source: AWI

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