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AWI Wool Market Report (28 June 2019)

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This week saw the final sales of the 2018/19 season take place and price falls were again the results at Australian wool auctions. The positive signs that emerged at the end of the previous weeks selling had swiftly dissipated by the time it came for sales to commence. The AUD had strengthened against the USD (+1.4%) and CNY (+1.6%) giving cause for our overseas buyers to remain on the side-lines.

The current demand through the entire wool supply chain, remains the predominant factor for the market doldrums. Demand for the raw, greasy product is presently described as being subdued at best. The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) dropped 51ac or 2.9% this week to finish the season at 1715ac clean/kg. With the stronger AUD against all major currencies, the falls recorded were less dramatic in US Dollar (USD) terms.

For the week, the USD EMI depreciated by 1.5% or 19usc to a season close of 1199usc clean/kg. As the season drew to a close, the market fizzled out in the last month and failed to replicate what had largely been a stellar, record setting year.

The AUD EMI set an all time high of 2116ac in August, nearly all individual micron categories broke their previous bests and the season average of 1939ac was the highest on record and indeed 200ac or 11.5% higher than the average price of 1739ac received in the 2017/18 season.

In USD terms, which is perhaps more indicative of reliable demand source scenario, the EMI moved 40usc or just 2.9% higher for the 2017/18 seasonal average of 1346usc to the 2018/19 season average of 1386usc. It is imperative to note though that the AUD v USD forex rate has actually decayed from the 2017/18 season average of .775 compared to the 2018/19 rate of 0.716 which is a 7.6% advantage to the favour of the AUD price.

Supply concerns throughout the season were well founded, with the amount of wool sold through auction dropping by 296,326 bales year on year. This is a 16.6% decline. There was approximately 1.48 million bales transacted through the auction system. An additional weight was sold by private treaty and direct sales with a rough estimate of 177,000 bales sold this way based on the AWPFC figure of 298 million kgs of production.

Market purchasing this week was again dominated by the Chinese top makers, traders and downstream processors. Indent buying remains sparse. The reduction in supply in recent weeks and months has been outweighed significantly by the slowing in demand from the northern hemisphere which has had a strong effect throughout the supply chain. Next week will see the start of the new wool selling season and 34,500 bales is scheduled for sale.

Source AWI

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