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AWI Australian Wool Market Commentary (20 May 2016)

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Australian wool auction markets traded the week at levels very similar to the quotes established the week before. Only slight variations occurred throughout the entire Merino fleece offering, whilst some larger and more positive moves were seen on cardings and crossbred types. The flat to weaker forex scenario remains in play, with the foreign exchange rate fluctuations producing a flat Euro but a 1.9% positive in USD terms for the week.

 

The wool market itself failed to flatter to gain just 0.3% of this potential gain. The EMI (Eastern Market Indicator) gained 4ac/clean kg for the week to conclude at 1291ac/clean kg, a level of 4% better than at the same stage 12 months prior. The EMI in USD slipped 15usc further into the favour of overseas users to 929usc/clean kg.

 

The Merino fleece sector had auction room buyers in a restrained frame of mind this week, with very little changes seen to price levels in AUD. Buying of the “straight” or standard Merino fleece types was dominated by a single large Chinese indent operator, who was very keen right through to the close. Most buyer/exporters were seemingly content or unable to match the levels or beat the voracity of the Chinese buying intent.

 

Competition was evident from a handful of the larger forward sellers wanting to limit exposure to their short positions, or trying to get into a long position, but as soon as they executed what they “needed” to buy they seemed to immediately lessen their aggressive approach to purchasing.

 

Whilst it has been reported the past month that the Merino market is currently paying premiums for the sale lots containing low readings of VM (vegetable matter), it is also extracting healthy premiums for those lots with higher yields. Most physical fleece wool contracts are written for average yields of around 68% so given that dry and dusty conditions have prevailed across large parts of Australia the past 6 months or longer, a dearth of lower yields are on the market, thus sending the better yielding lots into “must buy” territory.

 

Carding and crossbred types and descriptions were the most well sought after wools from this weeks activity, with gains of between 10 and 25ac/clean kg being achieved. In a rare occurrence, all three of the selling centres carding indicators are almost identical being within 1ac/clean kg of each other at 1088. The finer end of the crossbred offerings of 26.5 micron and finer continue to be fought hard for at auction, and the Melbourne prices lifted 25 to 35ac/clean kg for the week to match, then exceed, the higher levels that had been available at Sydney over the preceding weeks.

 

Next week’s offering has Fremantle not selling, so a national volume of under 30,000 bales is to be offered to the trade. A good market is forecast, with some strong upward pressure being applied on the final day this week. Global quantities are anticipated to be heading much lower than normal the next two months or so, therefore demand is likely to outstrip supply.

Source: AWI

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