Following a few wee s of the Australian Wool market consolidating, a large offering and stronger dollar conspired to send all prices to a negative trend. It was not so much that the market was in distress, but simply that the extra quantity of this week and the rostered volume to sell over the coming weeks released the pressure valve on buyers, both locally and overseas. General losses of around 25 to 30ac were recorded across all wool types and descriptions. The Eastern Market Indicator (EMI) eased 15ac then 13ac on the daily basis to close at 1303ac/clean kg, a weekly deduction of 28ac/clean kg.

The extra quantities on offer allowed a controlled reversing trend to be applied as sellers showed no desire to hold onto their wool and not accept the price. Passed in rates did increase markedly though com-pared to auction sale results of the past month or so. It is a belief amongst some industry participants that the market is on the drift just for a short period as the volume is absorbed prior to a consolidation leading into the three week Christmas recess.

A significant drop in intensity in Melbourne by the larger Chinese in-dent buyer of Merino fleece aided the ease back of the market. In Fremantle this buyer purchased 21.2% of sold Merino fleece and in Sydney a staggering 30.1% of Merino fleece was purchased by the one operator, and 35.6% on the last day. In Melbourne though, they purchased just 9.8% of the sold Merino fleece. This allowed all other buyers needing wool to just concentrate to Melbourne to obtain volume and at more advantageous price levels. Sydney sold consistently at levels of 15 to 20ac higher than other centres. Low cvh lots within all types least affected.

A large exception to the weaker pricing was the best top making and spinners Merino fleece types of 17 to 19 micron wool bound for European production. In a reasonably stylish offering these types fluctuated between being unchanged to just slightly easier as demand remains and a currency advantage of 1.5% was available on the Euro compared to last week.

The wool supply situation remains cloudy, as the offered quantities at the auctions are up 3.3% year on year, whilst tested quantities are down 3.6%. No doubt the wetter than normal late winter and spring has delayed shearing and delivery to store which goes a long way to explain the tested figure, but the additional quantity at auction seems to perhaps indicate larger stocks in brokers stores than factored in by exporters and overseas users.

Least affected this week was the resilient Merino carding sector which was basically dragged bac ward by just a few cents due to the reductions in all other sectors. Demand remains good, but local sellers are reluctant to sell forward given current unpredictable price direction & volumes available. The crossbred types(26 to 30 micron) continued to cheapen and a severe fall of around 60ac was seen at the finer end.

Volumes next week have grown by 10,000 bales since last week and 51,000 bales are now on offer. Hard to see a change in trend just yet as buyers will continue to buy to advantage in the large offerings.

Southern Aurora Wool Forwards Weekly Report

The seasonal high offerings, muted demand and a firming Australian Dollar combined to deliver the anticipated correction in the spot mar et Wednesday and Thursday. A small number of growers too advantage on the uncertainty prior to the opening securing options at close to the weekending spot.

January 19.0 options traded at 1530 with a 30 cent premium delivering a minimum price of 1500 whilst still being able to participate in any upward movement should demand pic up. Only light volumes traded prior to the commencement of auctions Wednesday with 19.5 trading at 1510 which is now 15 cents over closing cash. Better selling came in Thursday as both buyers and sellers looked for cover. Levels were 30 to 50 cents under last week’s peaks.

The current risk profile remains high going into next week. Buyers are hesitant to commit at what remain historically high price levels during a period of seasonally high supply. All markets are wary ahead of US presidential elections Tuesday. Opinion is mixed on the depth of the correction the market will take or whether this weeks price movement may signal a trend change.

We expect to see some bidding pre Christmas in the 1340 to 1360 range (cash 1370). New Year prices are a little harder to predict with interest probably falling into the 1330 to 1340 range. Both will depend on demand signals from off shore.

AUD COMMENTARY - SAW

In a star contrast to last week , this week the Aussie Dollar strengthened as the wee progressed, propelled higher by a remarkable lift in key bulk Commodity prices, and also by a broad based slide in the USD, as traders nervously head to the sidelines ahead the U.S Presidential Election. The AUD is holding just below its key resistance point of .7700 cents, a level it has failed to break and hold after 9 consecutive attempts. There is a growing band of traders who say that it is only a matter of time before this happens, and possibly next week the Aussie might crack this level, and then rally quickly to the next target of 7850.

INDUSTRY NEWS

AWTA KEY TEST DATA - OCTOBER 2016

The monthly comparisons for October 2016 compared with the same period last season show that 13.0% less bales and 12.1% less weight has been tested for the month.

The seasonal progressive comparisons for July 2016 – October 2016 compared with the same period show that 4.4% less bales and 3.6% less weight has been tested for the period.

AWTA Ltd has tested 110.8 mkg (million kilograms) this season compared with 114.9 mkg for the equivalent period last season,