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Australian Wool Market Report from AWI (30 June 2017)

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Wool auction results across Australia went largely to pre sale expectations this week. Unfortunately it was to the negative in the leading market sector of the Merino fleece, but all other types and descriptions on offer managed to hold their levels. The AWEX EMI (eastern market indicator) decreased by 26ac/clean kg or 1.7% for the week to bring the closing level back to 1507ac/clean kg.

When measured in USD, the EMI lost just 4usc to close at 1155usc / clean kg, as the AUD strengthened against the USD to minimize the loss in USD terms. The past week has seen the final sale of the 2016/17 season being held and 1,709,657 bales of Australian stored wool was sold for the season. This was over 56,000 bales more compared to the 1,652,720 bales sold last season.

Similarly, AWEX reports around 6.65% more first hand wool was offered at auction this past season, compared to 2015/16. Closing price levels in AUD and USD were 16% and 20% higher respectively on year to year values. The trading week commenced with buyers having eyes firmly planted on upcoming rostered quantities being advertised for the first 2 sales in July, more-so than the auction of this past week.

The larger auction quantity of over 90,000 bales scheduled for those weeks (compared to 50,883 bales in weeks 50 and 51) released the pressure on immediate purchasing and the market somewhat suffered this week because of that. Brokers reported growers holding wool for sale into the new financial year as being the reason for such a disparity in offered volumes, but anecdotal accounts of when wool is actually deemed as being sold for taxation reasons is seemingly still variable. As buyers relaxed their purchasing strategies and intent in the early sessions of selling, Merino fleece prices retracted accordingly and alarmingly in some cases.

Average super fine (finer than 18.5mic) types were most affected, and whilst general quotes indicated 50 to 70ac clean kg losses, some individual lots were well over 100ac lower than the previous sale. 19 micron and broader types finished the week at a general 40ac lower level. All of the skirting, crossbred and carding types and descriptions defied the cheaper Merino fleece market and remained in strong demand. Prices were firm unchanged for the series.

Volumes rather than demand was put up as the primary driver of prices retracting, and this was well and truly borne out with the resounding halt and recovery on the final day’s selling. Overseas users took advantage of the more advantageous prices available from exporters, and this demand transferred immediately into the auction rooms on Thursday almost completely stopping the slide in Merino fleece prices.

In fact, wool types broader than 19 were quoted by many as 10 to 15ac dearer for the day. The strengthened Australian dollar (AUD) against the US dollar (USD), up 1.38% for the week, spooked many offshore buyers and this strong gain also perhaps persuaded a few to lock into some of the current prices. Whilst quantities are large in up-coming sales, (50,000+ next week) the world is in a period whereby basically Australia is the sole source of quantity for Merino fleece. Fundamentally, demand is consistent and strong and given the strength seen at the close, markets should remain largely to the positive.

Source: AWI

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