Positive action again this week at the Australian wool auction markets extended the gains made in recent sales. A further 1% in general was added to price levels. The Merino sector of all types and decscriptions continues to dominate the interest of buyers, although this week saw the more intense activity contract to mainly those wools of 18.5 micron and finer. Chinese activity was again very much in evidence, but forward sellers and traders provided plenty of competition as the end of the first half of the season approaches rapidly. The Eastern Market Indicator (EMI) advanced by 15ac clean/ g to conclude the wee setting a new seasonal high level of 1378ac clean/kg.

The stronger AUD failed to dampen purchasing momentum from China, with many indent orders still very much apparent in the mar-et. Those spot buying orders were very strong, not only for price but also for quality. Many of those mills were appearing to be looking to improve their quality of input by concentrating on the better wools available. Premium pricing was apparent particularly in regards to higher strength (nkt - newtons per kilotex) and lower calculated CVH (co-efficient of variation hauteur) sale lots. These types are traditionally the domain of the Italian buyers, but this week saw many of those better lots heading to China.

Much speculation is being made as to the significant moves upwards the past few weeks, led by China. Lack of global stocks of Merino throughout the supply chain remains key, but issues have emerged around the Chinese annual CSQ (country specific quota). Many users in that country are fulfilling this years allocation prior to the New Year. Demand also appears to have picked up year to year, as prices are 10% higher in an offered volume of first hand wool at auction that is 6.2% larger. Anecdotally, a lot of that improving demand is in the recovering weaving sector which generally requires longer wools.

Most of the gains in the Merino sector were made early in the week , with Tuesday’s stand alone Melbourne sale setting the dearer tone for those markets to follow the next day. 30ac clean/kg was gained on Tuesday for the well sought wools of 18.5 micron and finer, whilst all other sectors was quoted as being “fully firm, but harder to buy”. Upon Sydney and Fremantle joining Melbourne in selling on Wednesday, prices immediately escalated above and beyond those levels set the previous day. In fact many wools were 30ac clean/ g dearer from the outset in the super fine area (finer than 18.5 micron). Prices being paid for the super fine skirtings were exceptional and in many cases matched their fleece equivalents on a micron comparison.

Thursday saw a day of consolidation around the set levels for those super fine wools, but some cracks appeared at the lower end of the type spectrum and some of those lots not quite hitting the “right” specifications fell away by the close of selling. All wools broader than 19 micron became softer except for the very best as buyers received the sale roster for next week showing a staggering 21% more volume to be offered than what was announced just 5 days prior.

In star contrast to the merino sector, all Crossbred types sold at generally unchanged to slightly dearer levels in large volumes.

Next week’s over 53,000 bales is to be offered. All centres closed the week at irregular levels, and orders are being filled so fresh orders are possibly needed to fuel the market further.

Financial and AUD Commentary - Source SAW

The Australian Dollar rebounded back above .7400 today, Friday, supported by surprisingly strong Chinese economic data, some US dollar weakness and an enormous rally in Iron Ore and Crude Oil prices. The CBA said “Yesterday’s stronger than expected Chinese manufacturing Data for November supported the belief that the Chinese economy is healthy and growing and this help boost Iron Ore and also underpinned the AUD.” However there is also growing concern over the health of Aussie Economy, and the Aussie dipped on Thursday on surprisingly weak growth numbers adding to the risk of a possible negative number for Australian GDP when that is released next Wednesday. On the Charts, the Aussie is floating between key support and resistance levels, with the top-side blocked at .7500, and key support at .7310. On the weekly Chart the AUD/USD remains within its long term falling trend channel.

Southern Aurora Wool Forwards Report

The market started strongly with the momentum of last week’s auction carrying over to the forwards. Exporters were cautious early in the wee looking for confirmation from off shore. Confidence and levels improved with the strong showing Melbourne sale Tuesday. Fine wools performed well with forwards trading December 1625, February 1585 out to June at 1555. Interest saw trades to January 2018.21.0 micron were steady at auction but performed well in the forwards with the key 1400 level being reached out to June. Options traded in April, July and August in both 19.0 and 21.0 microns. Thursday’s auctions steadied and we may have seen the pre Christmas peak. We expect interest in forwards to be maintained but expect the curve to deepen as buyers look for a correction into the New Year and now loo to factor in a bit more risk at current levels.

With over 100,000 bales rostered for auction in the next two wee s performance of the auction will be critical in determining the direction of the forward market. Ranges for the first quarter of new year – 19.0 micron 1550 to 1580 and 21.0 micron 1350 to 1390 with a break to the topside should demand increase and the mar et hold.

Industry News

AWTA Key Test Data Summary for November 2016

The monthly comparisons of total bales and weight AWTA tested for the month of November 2016 compared with the same period last season are 21.5% more bales and +21.8% more weight.

The progressive seasonal comparisons of total bales and weight for July 2016 to November 2016 compared with the same period last season is that there has been 1.6% more bales tested and 2.2% more weight tested.

AWTA Ltd has tested 152.5 m g (million kilograms) this season compared with 149.2 mkg for the equivalent period last season.