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AWI Commentary – Australia Wool Market Report (25 May 2018)

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Another sensational and historic week at Australian wool auctions. Prices for all wool types and descriptions finer than 28-micron leapt forward once more as buyer’s purchasing intensity lifted despite some nervousness within the trade as to the potential regarding how high the market may go. The AWEX (Australian Wool Exchange) EMI (Eastern Market Indicator) gained 2% or 40ac clean/kg to close the week at 1983ac/clean kg, an all time record for both daily and week ending values of that indicator.

Last year at the same period the EMI sat at 1495ac so we are now 32.6% higher year on year. The EMI when expressed in USD (US Dollars) is also charting towards record territory as that indicator went to the 1500usc clean/kg mark after gaining 2.36% or 35usc for the sale series. This figure is in fact a better year on year improvement than the market in Australian dollars, as the US EMI last year, at the same period was 1122usc clean/ kg. This is a 12 month gain of 378usc or 33.8%.

As we move further into what is traditionally a quieter time of the selling season, the overseas users are acutely aware of the supply issues that arise at this time. Lower volumes flow onto the market here in Australia as Winter sets in, but compounding the problem for processing mills is the other major source of Merino wool, South Africa, will shortly go into hibernation for two months.

Their sales are not scheduled to resume until August, leaving Australia the only primary source for anyone interested in significant volumes of Merino wool for the duration of the South African break. Chinese buying activity was once more front and centre, but this week was somewhat different as the largest indent buyer for that destination topped the buying lists.

This normally means that mills and traders were unable to lock enough volume in from their trader exporter for their immediate and near-term requirements. This meant they had to issue buy orders (indent) to their sale room operator. Nearly all of their interest targeted Merino fleece wools of 18 to 22 micron, with the broader edge of that range the most sought. In what is now a three-week long trend, Merino prices were extremely orderly in the way their prices rose and the three selling centres were remarkably similar in the closing price guides. This was not surprising given the current trend and the dominance of indent buyers, but still indicative of overseas interests being very aware of the price they need to pay to acquire inventory to place on machines.

General daily gains of around 30ac were made, making up the week’s general gain of around 60ac. The good merino skirtings followed that pattern, but even the lower quality types edged 30ac higher. Cardings again moved more conservatively, but still posted prices that were 25ac higher by weeks end. The extremely dry conditions across much of Australia continue unabated, with just Western Victoria and much of Tasmania the only areas that have had some relief.

While the wool quality is definitely lower it is surprising that length of fibre and the tensile strength is remaining in “good” readings, with most wool managing to test 90mm greasy and above 30nkt. With such tough conditions being experienced year long, this is testimony to the extraordinary resilience of the Merino animal and its ability to cope with the toughest of environments.

Some would say just like their owners, who are now getting a very healthy financial return for their long-held faith in the breed. Next week sees a similar volume to go to auction and its very difficult to see any change to the sentiment seen at auctions.

Source: AWI

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