The wool market roared back to life after the three week Christmas break with three figure gains across many Merino microns. Despite the large offering of 51,300 bales, the Eastern Market Indicator (EMI) gained 67 cents to finish the three day trading week at 1422, it’s highest point in over five years and just three cents short of its all time high set back in 2011.

The EMI in US dollar terms lifted 56 cents to 1061, showing true demand and concerns over supply are driving the current bull market for wool rather than currency fluctuations.

The first day of trading for 2017 saw frenzied buying with pent up demand particularly for finer wools driving three figure gains across many Merino microns. Across the second and third days of trading the market lift continued but in a more subdued tone. Perhaps the biggest development for the week was seen on thursday with many expecting the one-cent gain in the Australian dollar overnight to push the market in reverse, however the market defied the sentiment and continued it's rise.

By the end of the week all Merino microns lifted to the tune of 70 to 150 cents with both better quality fleece lines and lesser types all enjoying increased attention from buyers.

Trading rooms saw all buying segments active with indent, forward sellers, processors and even some speculators working hard to secure wool. Chinese, European and Indian interests were all active in the market. Even though 51,300 bales were up for sale, this weeks offering included one of the smallest percentages of Merino wool for the selling season and there is concern over the amount of finer wool coming onto the market in the future.

The good season experienced across Australia is now becoming evident at sales with higher VM wool being seen however this is so far not deterring buyers and in fact some processors are looking at the higher VM wools as an opportunity to secure good clean wools at a lower price by choosing to reprocess these types.
Crossbred wools for the week were dragged up by the Merino frenzy and while the volume of these wools was heavy, they lost only five to ten cents in general in a market environment that expects these wools to get cheaper. Carding in general were 30 to 40 cents dearer pushing all three carding indicators to record territor, continuing a strong run that has trended for some time and the overall pass in rate of 5.0% was 4.3 percent lower than the last sale of 2016 and shows woolgrowers are in general, keen to accept these prices, not surprisingly.

The question now remains for next week: with an offering of 55,394 across three selling centres with only Melbourne selling on Tuesday, will the bench-mark EMI hit a record or will the foreign exchange rate finally have a say?

Southern Aurora Wool Forwards Report

A busy and challenging week for all participants across the pipeline. Grower received excellent returns for their wool as exporters and processors pushed prices for merino types more than 100 cents over the Christmas close. The forward markets traded briskly as exporters looked to cover early autumn sales and build stocks into the new season. Supply concerns and solid demand are the short term drivers. Buyers will be looking to some stabilisation of price at these new levels. Rapid price movements usually lead to demand strangulation. Pleasingly the rise stimulated activity into the spring and next year delivering some historically high hedging levels. The next weeks will test the resolve of buyers and sellers alike. We expect a volatile time ahead for both the auction and the forwards.