An extremely solid wee at Australian wool auctions with prices for all types on the ascendency. An unseasonal lac of quantity, due to adverse weather conditions, combined with a spike in demand for prompt to near shipment has led to the keener pricing.

China remains a key ingredient to that demand but renewed interest from a very positive European sector has seen competition increase markedly for the better wools in particular. Most affected are the wools 19 micron and finer. As a result, a 10ac/clean g rise in the Eastern Market Indicator (EMI) to 1300ac/clean kg has been extracted.

Erratic price movements were experienced between centres. The majorly positive market gains in the merino selection were experienced in the Melbourne centre where prices pushed 15 to 25ac higher as that centre didn’t sell in the very strong Thursday sales of last week.

As the centres tried to align, the lack of quantity in the Sydney market kept the pressure on, and market prices there remained relatively on the high side and surged another 5 to 15ac. Conversely in Fremantle, prices were weak throughout, as high volumes of poorer tested wools in regards to position of break in the middle (PobM) and calculated CVH impacted negatively on grower returns.

Merino skirtings forged ahead by another 20ac and buyers concentrated on those wools finer than 20micron. Cardings and crossbreds were stable throughout and gained a small 5ac rise in places.

Next weeks small offering of 33,000 bales and a currently weaker AUD:USD should see a very good market.

INDUSTRY NEWS

AWTA Key Test Data Summary for September 2016

For the completed month of September 2016 compared with the same period last season the tested number of bales is 5.1% less and weight tested is 4.2% less.

For the progressive season comparisons for July 2016 – September 2016 compared with the same period last season there has been 0.1% less bales but 0.7% more weight tested.

AWTA Ltd has tested 76.9 mkg (million kilograms) this season compared with 76.4 mkg for the equivalent period last season. Source: www.awtawooltesting.com.au

Southern Aurora Wool Forwards Weekly Report

The forward markets and the spot auction again delivered mixed messages. Trading was light again this week on the forwards with the strongest bidding prior to the commencement of auction sales Wednesday. Opportunities for growers to hedge into the new year at levels around cash appeared in reaction to last Thursday’s rally in Sydney prices. First quarter 2017 levels of 19.0 microns of 1500 and 21.0 microns of 1385 were achieved and represented a flattening of the forward curve. 21.0 microns traded ahead of cash at 1400 cents for October. The 21 index opened the week higher at 1389 buoyed by Melbourne market playing catch up following the staggered sales roster last week . It settled 5 cents lower Thursday (1384) as Chinese indent demand remained soft. We expect the forward market to reflect the general uncertainty with limited opportunities around cash (1370 to 1400) prior to Christmas and a trading range of 1350 to 1380 in the new year. Pleasingly the premiums on the finer microns continue to open up delivering better hedging opportunities. The basis between 19.0 and 21.0 now sits at 144 cents (1528 v 1384) the highest since November 2011.Another positive note for the forward market this week was that we were able to execute the first wool option contract on the Riemann platform. A put option traded at 1350 for April 2017 at a 35 cent premium.

Weekly Financials and AUD Commentary—Source SAW

It’s been a big significant week for the Australian Dollar, as on Wednesday this week the AUD failed for the 5th time to crack above the significant .7700 resistance, resulting later in that day in a nearly 100 points sell-off to .7604 Earlier in the wee the AUD had moved quietly higher from Monday’s opening of .7640, helped by higher Oil prices. On Thursday night the AUD again came under intensifying pressure and hit a two week low of .7559 before rebounding modestly towards the New York close.

Today (Friday) we are trading at .7578 ahead of tonights the major U.S Employment Report. According to Daniel Been, head of FX strategy at ANZ, tonight’s Report could lead to a huge move in the US dollar, hence the Aussie, given increased optimism that the Fed will likely hike interest rates in December. Adding to this volatile mix is the anxiety in markets as we move towards the November 8 US Presidential Election. Last week’s turmoil in global financial markets caused by Deutsche Bank , seems to have faded a little, after its shares hit a record low on Tuesday, before recovering after the $14 billion U.S. claim appears to be headed for a compromise settlement.

So in a short wrap the Aussie is under a lot of pressure and is likely over the next week to see a large and volatile trading range, which will likely impact the pricing of Australian Commodities and especially Wool. Technically the Aussie’s rebound from 0.7441 is still in progress, however upside has been capped at .7700. On the downside, 0.7540 is minor support. If that breaks the next point of strong support is 0.7441. In the bigger picture, AUD/USD is still staying inside long term falling trend channel.