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AWI Australian Wool Market Commentary (24 November 2016)

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An extraordinarily strong selling week at Australian wool auction markets. The Merino sector has a hit a sweet spot with our overseas customers with many buyers appearing to be bidding without a selling price at times this week. Prices rose constantly during selling in an auction wee that saw all Merino types on offer 60 to 80ac clean/ g dearer by the close.

 

Cardings came under pressure too and progressed 40ac clean/ g dearer and also pleasing to note was the 15ac clean/ g uplift in the broader crossbred types. The only casualty for the wee was a very limited volume of crossbred wool 25.5 to 26.5 micron which dropped 20ac clean/ g on established price levels.

 

The Eastern Market Indicator (EMI) advanced by 49ac clean/ g to conclude the wee almost 4% higher at a seasonal high of 1363ac clean/ kg.

 

Assisting but not explaining all the shift this week was the AUD to USD forex rate. For the second week running the forex went significantly in favour of local sellers over the past seven days, falling over 100 points or 1.4% from 74.78 to 73.75.

 

At one stage the currency hit 73.21, but that was before selling commenced and it is left to the imagination whether any buyers too advantage of those sorts of levels. Those manufacturers buying in Euro were not so well looked after and an appreciation of nearly 4% in that currency transpired.

 

Some commentary referred to this week’s buying as “panic purchasing”, but in reality the drop in the USD versus AUD from wee to wee saw a lesser weekly 22usc clean/ g impact on the overall mar- et. The EMI when expressed in US finished at 1005usc clean/ g. That sort of price rise should be able to be absorbed by end users without too much pain if buying on the day’s ruling foreign exchange rate. The pain would be felt heavily though by those wool traders locked into forward orders of Merino wools covered on the old exchange rate and based upon the ac/ kg price at the time of booing in the past.

 

Adding weight to the year on year improvement in demand for Merino wool are the much larger auction volumes. AWEX point to 5.6% more firsthand wool that has been offered so far this season when compared to last year. This may prove to be purely a result of the additional extra sale we had last year which saw a sale in the impossible “Week 53” of the year. Last year also saw a wee 25 sale being held pre Christmas with around 42,000 bales being offered. The soon to be released November AWTA Key test Data should give more in-sight as to the year on year volume comparisons.

 

This wee s extensive rise seems to reinforce the commonly held belief amongst most participants that stocks of Merino wool are dangerously low. The price reaction this week across the entire Merino market segment was out of the normal and considered an outlier in statistical terms, but the intense interest from China was exceptional.

 

 

Next week’s sale roster shows around 48,500 bales set to go under the hammer. With Fremantle closing at or above the eastern states price levels, this is usually a good lead that the following week will at least commence stronger again. Continued interest from China and outstanding forward commitments of the exporters should see the bull run continue at least into next week and perhaps remain the trend until the Christmas recess in 3 more sale weeks.

Source: AWI

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