As signalled towards the close of last week’s selling, Australian wool auctions produced extensive price rises for all categories within the Merino segment of the offering this week. In an offering of less than 30,000 bales, of most interest to the trade were the types finer than 19.5 micron once again. By week’s end, all Merino qualities came under heavy buying pressure. The strength of the market in the fleece room on the final day was intense, with several operators appearing to be “buying at best” on behalf of their overseas clients. As a result of this market strength, the Eastern Market Indicator (EMI ) gained 18ac to 1318ac/clean kg which is 149ac or 12.7% higher than at the same time last year. In US dollar terms the price is also significantly better at 993usc/clean kg, a level 15.5% higher than at the same sale last season.

The more favourable AUD v USD exchange rate certainly helped the positivity, but largely a greater global demand scenario is becoming evident. Both the testing and auction figures are discounting the theory of a “short supply” so far this season as both data sets demonstrate an actual increase of 0.7% in wool tested and 3.2% more offered so far this season in comparison with the same period last year. These figures when combined with other factors such as low stocks of greasy wool in front of machinery, continuation of the low global wool production trend and a recovering retail environment are building a healthy case for these prices to remain, and perhaps improve further as the season goes on.

In the Merino fleece sector, general gains of 30 to 40ac/clean g were registered, with some better specified superfine (finer than 18.5 micron) lots achieving 60ac gains as European interest intensified through the week. This upward price pressure has been exacerbated by the addition of a significant and high quality Italian order into the market, providing even stronger competition to the usual operator. Within this very restricted spinners bracket, premiums of well over 150 to 200ac/clean kg are now common place. At the other end of the scale, large rises in the lower types have also occurred and very little discounts are currently being applied to sale lots exhibiting high position of break in the middle (PobM), over-long greasy staple length (gsl), high calculated coefficient of variation (cvh) or low staple strength (n t) tender measurements.

Merino skirting prices tracked similarly to the fleece and a general 25ac/clean kg was added to their values. The better superfine broken types appreciated further and gained 45ac for the week. Cardings were very low in supply, but what was available and sold gained 5 to 10ac/clean kg with the better colour crutching and locks types faring best. Crossbreds were the only market sector to actually register falls, and lowered by 15ac/clean kg.

The strength at the close of this wee s selling suggests that the 36,000 bales on offer next wee will be strongly fought over. Whilst most buyers will be loo ing for a consolidation or reprieve from further price rises, this may not be forthcoming, as the cur-rent trends indicate the very robust mar et will continue as de-mand from India and Europe competes with China.

Southern Aurora Wool Forwards Weekly Report

A strong start to the wee was anticipated with bidding in the forward markets picking up pace. Bidding was at or close to cash Monday and Tuesday but patience from the sellers was rewarded with buyers lifting levels on pre auction Wednesday paying 10 to 20 cents over cash for pre Christmas maturity and flattening the curve for the New Year. This was confirmed by the auction market performing strongly particularly in the finer qualities.

The premium for 19 microns over 21.0 continues to widen (now 151 cents) maintaining it’s 5 year highs. Crossbreds remain sluggish. Prices for 28 and 30 micron are now back to their long term average levels.

The week ahead should present growers with opportunities to hedge pre Christmas at cash with November trading 1495 for 19.5 and 21.0 at 1410 during the week. February traded 1390 for 21.0 (cash 1405) confirming the flattening of the forward curve.

Weekly Financials and AUD Commentary—Source SAW

The Australian Dollar had a rollercoaster week, trading to a high on Tuesday of .7628, then falling to a low on Thursday night of .7509, before a solid rebound today (Friday) to .7566. The rebound was helped by strong performances in the price of a number of key commodity exports including Coal, Iron Ore, Copper, Oil and Gold.

Tapas Strick land, Senior Markets Economist at the NAB, said the AUD’s resilient performance was helped by stability in the Chinese Yuan along with further strength in coking coal prices. Coking Coal Contract price in Australia had been set at $US200 a tonne, a massive 100% increase on Q3,” he said. “Very rough back of the envelope calculations suggest that could boost export earnings by up to $A1bn a month, and potentially halve the monthly trade deficit.”

Earlier in the week the Chinese yuan set at a six-year low, this, after returning from its Golden Week holiday, surprising some traders as the Chinese Central bank allowed the official yuan rate to weaken to the lowest level in six years. It is a signal the Chinese Government will let the currency slide when necessary, and is positive for the economic growth outlook .

In other good news, figures released underscore the sure and solid growth in the U.S Employment numbers, as Initial jobless claims have now fallen to lows not seen since the 1970s.

The AUD/USD’s fall last week, and the price action this week suggests that the earlier rebound from 0.7441 was completed at 0.7709. Initial bias on the charts stays on the downside with a first target support of 0.7441 support. A break of that would be bearish, with the next major support level is 0.7144. On the weekly charts the AUD remains locked inside a falling trend channel.