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AWI-Australian wool market review (17 January 2020)

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Australian wool auctions returned after recess and some formidable gains were made from the outset of selling. Initial concerns regarding the very large quantity on offer proved unfounded as several buyers attacked the catalogues from the opening lot of selling. Three digit gains in values of mainly the Merino fleece sector were commonplace by the first hour.

The three week break had obviously created some pent up demand, but from all reports, the manufacturing situation in China particularly has recorded better than expected figures in the last quarter of 2019. Confidence appears to be on the improve and as the global economy swings further to the resolution of issues such as Brexit and the USA v China trade imbalance dispute this should only improve.

The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) improved starkly this week to 1609ac clean/kg. This represents a 3.3% or a 51ac gain from the pre-Christmas closing basis. When the EMI is expressed in US dollars (USD) the gains are even more impressive. The USD EMI moved up 4.2% or 45usc to a closing basis of 1111usc clean/kg for the week.

Of most attraction to wool buyers was predominantly the Merino fleece and skirtings segments of the selection. Wild fluctuations occurred throughout the week, but price guides across the Merino sectors posted 30 to 90ac rises. Prior to the pull back on Thursday, these gains were all mostly well over the 100ac mark. Crossbreds disappointed somewhat after commencing with solid gains, but by the finish had recorded small retractions of 20ac or so. The carding market was consistently strong each day and by the close of selling, around 50ac gains had been extracted from the buyers pockets.

As is prone to happen at times in the free market situation that wool trading exists in, the weeks’ activity was overshadowed by erratic price movements. In reality, such fluctuations do not help stability of trade at any level of the pipeline and in fact can be at times more towards the detrimental. Variations of around 100ac/kg in returned values were recorded this week and entirely dependent on the timing of the sale, not a reflection of true market forces but more so of human issues.

Somewhat surprising on the surface was the pass in rates hitting over 10%, despite the positive gains. When looked at closely though, this figure was some contribution from the crossbreds which failed to fire, but mainly from the Merino sector in Western Australia which failed to reach anywhere near the highs of the Eastern markets of Sydney and Melbourne and were subsequently passed in.

Next week sees a massive offering of almost 60,000 bales scheduled to go before the trade.

Source: AWI

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