A most extraordinary wee at Australian wool auctions with wildly differing results being achieved on a day to day basis. In a nutshell, the market fell 50ac immediately upon opening, then firmed to remain relatively unchanged in the middle day and then rose 20ac on the final day. The adverse market movements were on the Merino fleece, carding and skirting sectors. The crossbred types experienced much better results and this segment saw levels improve by as much as 25ac clean/ g. The Eastern Market Indicator (EMI) fell 29ac clean/ g from the seasonal high level and concluded the wee at 1349ac clean/kg.

Obviously, at theses relative high points in the mar et price, buyer sentiment alone can radically influence price and this is what we witnessed this week . After weeks of rapidly improving levels, the weakish market tone at the conclusion to last week , weekend was added to by early week price resistance from overseas mills. A stronger AUD had all buyers in a negative frame of mind as well and thus the falls were exaggerated somewhat. Extreme and seemingly irrational on the surface movements occurred initially, but when examined more closely, some sense was made of the situation. Some stronger indent buying emerged mid week which allowed the resumption of “normal” competition and restored the confidence of purchasers. As prices settled, new business was forthcoming and the market moved back to a positive tendency.

Chinese activity was again very much the leader in market direction, although the week was dominated more-so by wool traders, both Chinese and local. Traders too advantage of the lower prices available early in the week as the larger indent buyers sat out to reassess their buy in levels. The greater than expected rostered volumes to sell in the last two weeks before Christmas recess had indent buyers second guessing their strategy but after witnessing the top traders gathering quantity at “cheaper” levels, they quickly rejoined the market, even though the AUD v USD was over 1% to their disadvantage compared to the previous sale. Indent buyers are those companies operating to buy at spot prices here at auction on behalf of their overseas mills and customers. These indent orders are generally for prompt shipment.

A trend revealed at the end of last week , the most affected types this series were again those Merino, lower end wools of the type. The best specified wools of 18.5 micron and finer finished the week at similar levels to the previous close, although they were at one stage 30 to 40 cheaper as well. Even though the published MPG of these microns show 30ac lower levels, most of this is made up of the lower wools being 50 to 60 cheaper. In addition, the average price of the better wools is included, not the price level at the close of selling.

For consecutive weeks, the crossbred sector sold in star contrast to the Merino wools, with all types broader than 27 micron appreciating by 20 to 25ac clean/kg. This came as a surprise to most participants, as a significant volume of these wools are hitting the market and are the major contributing factor for the 20% increase in auction volumes.

Next week’s over 56,000 bales are to be offered and will surely test the resolve of the market. Given the erratic nature of this weeks auctions all outcomes should be considered possible, but the decisive price turn to the positive combined with the strong conclusion on Thursday, leads us to be optimistic of a good market to send us to the annual three week Christmas recess.

Financial and AUD Commentary - Source SAW

In a remarable comeback the Aussie Dollar this week managed to brush aside Australia’s weakest GDP result since the global financial crisis, rallying hard from the low of .7418 made just after the release, to power up through .7500, before easing today ( Friday) to .7470 on the back of strong gains in global Equity and key bulk Commodity markets. Also this week the Dow Jones hit a new record high, its 12th record since Donald Trump was elected President in November. Good news data from China surprised all beating expectations on growth as numbers released from China’s General Administration of Customs, showed the value of both imports and exports surging from a year earlier in US dollar terms. Exports jumped by a stronger 5.9%, and imports increasing by 6.7% from a year earlier. That’s the fastest expansion since September 2014.

Trader views on the direction of the AUD are sharply divided, with some saying the surging commodity prices, and a rebound in Chinese and American growth will support a rising AUD, while a growing number point to the falling employment, investment and growth numbers, and say Australia has yet to take its hard medicine, is living beyond its means and rates and the AUD must fall. Technically the Aussie’s corrective rise from 0.7310 should was completed at the .7500 resistance and bias remains the downside, with first key support at .7310. The AUD/USD is still caught inside its long term falling trend chan-

Southern Aurora Wool Forwards Report

An interesting and challenging week for the market at auction and in the forwards. The anticipated correction in the auction from 5 year highs produced larger than expected fall on the first trading day in all three centres. A base and a bounce occurred on the following day. These stimulated action from both buyers and sellers but on limited volume. Equal volumes of outrights and options traded as both sides looked to come to terms with the volatility of the market over the last month. 19 Micron moved from 1570 to 1517 rallied to 1643 only to fall to 1593 settling yesterday at 1609. 21 micron showed a similar pattern falling from 1414 to 1350 to rally to 1442 and fall back to 1391 settling yesterday at 1400. Growers reacted by requesting strikes above the recent lows of 1517 (19.0) but attractive enough for exporters to deliver fair value premiums.

We expect similar trading action into next week . Buyers will be pricing in the volatility and risk as we more into the Christmas recess. We would expect bidding pre Easter to be in the 1560 to 1580 for 19.0 and 1370 to 1380 for 21.0 micron. Post Easter likely to be 20 cents under these levels. These levels are still in the 85 – 90 percentile bands for the last 6 years. We expect to see continued interest from the grower side on Options as they look for insurance against a deeper retraction but wish to take advantage of any upward moment.