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Australian Wool Market Report (27 August 2015)

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The Australian wool market has proven not to be immune to the turbulent global economic problems this week as auction prices retracted by around 40ac/clean kg for consecutive weeks. Much of the negative sentiment stemmed from factors not usually associated with wool trading, but with China – Australia’s largest customer being at the centre of the general turmoil, it was somewhat inevitable that the market was to suffer as a result of the external issues.

 

The EMI (Eastern Market Indicator) closed the week at 1222ac/clean kg, falling identically by 41ac/clean kg compared to the previous selling week.

 

For much of the week it seemed the similar wait and look approach was to continue to bear the market down. However, a subsequent local fall at auction combined with the USD versus AUD foreign exchange rate falling to just over 0.71 some customers broke rank and wrote new business as the wool price fell below pre-recess levels when expressed in US dollars delivered China basis.

 

Much of the new buying activity actually occurred as sales were concluding or had finished for the week.

 

Some of the local buyer’s saw opportunity with the reduction in AUD levels being paid at auction and continued to forge ahead with their purchasing strategies and crossed off forward sales at attractive margins while others chose to basically sit out of the competition until clearer signs emerged from overseas buyers of wool.

Those that purchased were able to then take on further risk and obviously at lower levels, but this type of trading action may ultimately put an interim floor in the market, preventing further radical falls occurring in relatively short periods of time as witnessed the past two weeks.

The market for Merino fleece of all microns was again the most volatile sector of sales and wildly fluctuating reductions of between 25 and 80ac/clean kg were registered by the time sales had concluded for the week. Most of the falls had occurred on the first day of selling on Tuesday with the final day on Wednesday actually showing improved price levels across a lot of the micron ranges.

 

The super fine (finer than 18.5 micron) Merino fleece types performed better than other segments and only 25 to 35ac/clean kg were lost, but in Sydney the falls were greater as the prices in that centre had been sitting at higher levels than other selling centres.

 

Merino Skirtings were not anywhere near as affected as Merino fleece and levels concluded at 10 to 15ac/clean kg lower after being at times 30ac cheaper earlier in the week. Cardings of all types and descriptions were again well sought and managed to nearly hold their levels but drifted slightly throughout to be quoted at 10ac/clean kg lower at the end. All Crossbred types were largely unchanged to softer for most of the week, with some losses of 5 to 10ac/clean kg being recorded.

 

The 42,000 bales up for sale next week should hold somewhere near to the current market levels for a number of reasons. Reports of renewed interest from overseas, a quickly rebounding positive sentiment in economies affected this week, grower resistance to lower prices evidenced by the growing pass in rates and the need of recently absent local buyers now needing to buy give growers optimism to upcoming sales.

Source: AWI

 

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