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AWI Australian Wool Market Commentary (Friday 24 June)

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Steadily rising price levels were the feature at Australian wool auction markets this week. A very small offering of just over 22,000 bales was eventually offered to the trade with just the two Eastern centres in operation. Prices were impeded from registering much stronger gains by the ever strengthening Australian dollar against the US Dollar . As a result, some price resistance was being reported, as overseas buyers appeared to be faltering in their intent to follow the market up.


The EMI (Eastern market indicator) snubbed this negativity and progressed by 3ac each day to gain 6ac for the week and conclude at 1285ac/clean kg. When the EMI is measured in US dollars though, a far more impressive 2.4% gain was recorded to see the USD EMI finish the week trading 23usc/clean kg higher at 968usc/clean kg.


For the second consecutive week running, the overwhelmingly popular consensus of a cheaper market prior to selling was proven erroneous. Whilst the reported low volume of fresh sales and the disadvantageous rates of currency exchange would normally drive prices downwards, the extremely low global supply and outstanding uncovered open positions quickly gained ascendency in determining market direction. Improving local returns in general were achieved, with a willingness of grower sellers to pass in their wool if realistic reserves had not been met, thus helping the market retain its strength. In small offerings this can be a successful strategy with little or low risk.


The Merino fleece market results split off into opposing directions this week. Those wools of 19.0 micron and finer drifted down by a general 5 to 10ac/clean kg, whilst 19.5 micron and broader types gained a healthy 20 to 25ac/clean kg for the week. The market appeared to close at the highest point, indicating a few of the buyers had left their run late to cover off buying and may be something left uncovered to cross off next week?


Merino skirtings sold fully firm on established levels, with just the few lots testing over 20 micron gaining a decent incremental rise. All carding types drifted slowly and methodically down by 5 to 10ac/clean kg, as did crossbred types of all descriptions.


All three centres will offer next week in the oddly named “Week53”. Only the wool industry could fit 53 weeks into a year! Just over 32,000 bales is available to the trade which should see the market hang on well enough. The unexpected stronger market this week and the stability witnessed at the close of selling also points to a good close to the 2015/16 wool selling season.


The potential to see a substantially weaker AUD due to outcomes in Britain is tipped to most likely see an improving wool market scene locally and continue to push the EMI towards the 1300ac/clean kg mark. Conversely a stronger AUD will hamper the price improvement capacity somewhat.


Source: AWI

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