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AWI Australian Wool Auction Commentary (24 November 2017)

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After last weeks’ consolidation at Australian wool auctions the market found itself on a cheapening trend by the close of selling for the week. This price retraction was evidenced across most of the offerings, with the carding sector the only segment to escape the downturn. Large volumes on offer this week, and the next three, as well as substantial pressures on access to finance were the talk of the week. These factors were the predominant causes that set the market into reverse for the time being. The AWEX EMI (Australian Wool Exchange – Eastern Market Indicator) peeled off 14ac clean/kg to close the sales at 1669ac clean/kg. When measured in USD, the market again went to the favour of USD users and dropped, albeit just 6usc clean/kg, to a week ending value of 1272 usc clean/kg.

The Merino fleece and skirtings offering this week traded for 75% of the week at largely firm unchanged levels, but some mixed commentary filtered through to the market mid way through the Thursday selling day. Many exporters said that that spooked the market, with some exporters and indent buyers withdrawing orders. By the end of the day though, the final summary had halved the earlier reported losses. The Sydney market was perhaps the hardest hit as the initial drop on Thursday of just 5 to 10ac clean/kg in the first hour extended to generally 50 to 60ac cheaper lots at the end of the day. The selection of Merino types available this week was considered to be largely suitable to just the Chinese market, with European types in far less supply.

Perhaps growers of those higher specification lots are targeting next weeks designated super fine sale? Most exporters approached this week cautiously and fully expected better buying opportunities, but for the first day at least that scenario failed to materialize. As the prices weakened through the last part of the week though, the finer than 18.5micron Merino types were hardest hit and upwards of 40ac clean/kg were eliminated from their starting values.

The large offering of 19 to 22 micron Merino descriptions held up remarkably well though and just 15 to 20ac clean/kg was lost. In USD terms though this was far less significant as the AUD strengthened around 0.4% to keep those wool types in similar delivered USD terms, indicative of demand remaining in play with largely sentiment now the ruling price setter. The rapid rise of the crossbred market of just a fortnight ago has been proven to be an anomaly, as prices have retreated almost as quickly as they went up. Another 30 to 40ac clean/kg was lost this week, but prices still sit around 7% higher than they were last month.

Cardings remained largely strong and relatively unchanged in the continuation of the strong activity in this type sector. With widespread talk of local exporters short on cash for wool purchases, the same probably cannot be said for the top three or four auction buyers. These same buyers have remained extremely intent on buying in large volumes of inventory and have dominated buyers lists for the past three weeks. They again have bought 50% or more of the offering this week. There are just three weeks of auctions left to sell prior to a three week recess for Christmas. It is expected that there will be around 50,000 bales in each of these sale weeks. Although we have seen an odd and strange price pattern set this week, the weaker trend is sure to encourage some absent buyers back into the market given they can find the cash. Demand is surely still there for wool and all these larger volumes does is to give opportunities to buyers.

Source: AWI

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