Record highs ended the week at Australian wool auction markets during a series that saw prices resisting adverse currency fluctuations and initial reticence by overseas bidders to pay higher levels. Tuesday was a standalone sale which consisted of a nice selection of Tasmanian wool sold in Melbourne. Most types were in the super-fine Merino segment. Prices were all quoted as being dearer for wools finer than 18 micron and slightly off the boil for 18.5 and broader. This proved to be the trend for the rest of the selling week. The Crossbred offering started on Wednesday and it was clear from the outset that all types and descriptions would continue the reversal of their season-long woes. Prices pushed higher for the second consecutive sale and added to the improved clearance rate, but crossbred wools are still topping the passed- in rates as some growers continue to resist the levels being offered.

The Eastern Market Indicator (EMI) hit a new high on the final day pushing up 3ac clean/kg or 0.21% higher for the week. The closing level on the final day settled at 1440ac clean/kg, eclipsing the previous mark of both the daily high EMI of 1439ac just a month ago and the week-ending record high of 1437ac last week. Significantly when expressed in USD, the EMI appreciated by a greater margin of 1.37% to 1111usc clean per kg, as the wool market was able to absorb the stronger AUD against all the major currencies used in wool trading. The AUD was exceptionally strong against the Euro gaining 1.8% and the Euro EMI being over 2% dearer week to week.

The Merino sector of the market was dominated by the strong movements upwards of all types finer than 18 micron. Unlike the recent weeks trend of buyers chasing the better wools, this week it was the lower specified lots that were registering the largest of the gains. Rises of up to 50ac clean/kg for the sale was recorded in this section,. The better types gained just 10 to 15ac clean/kg as those wools were probably slowed down as the Euro weakened against the AUD. The Merino types of 18.5 to 22 micron drifted slightly throughout and finished in buyers favour to 10ac cheaper as buyers prices were trying to match the currency movements of the weaker USD. Another good offering of burry (more than 4% vm) Merino fleece met very good competition from several exporters, and sold fully firm to slightly dearer across all microns, bucking the cheapen-ing trend of the FNF/LB fault wools in broader types.

Merino skirtings had a lack lustre sale series, with only the better finest types showing lower (less than 4%) vm (vegetable matter) remaining in positive territory. A general 15ac clean/kg lower level was the result on most of the types and descriptions on offer. Cardings were strongly sought from the outset and upward price pressure was evident through to the close. A general gain of 10 to 15ac clean/kg was made, but increasing VM levels has seen lower VM lots chased keenly and influencing price more-so than the usual major determiners of bulk, colour and length.

In the crossbred segment of the market, the swing in fortunes to the positive continued. This series has witnessed the neglected wools broader than 30 micron included in the price escalation. As noted last week, buyers are becoming increasingly wary of those clips that are considered under prepared and in particular those clips prepared to un-skirted lots (d-certs) quality. The markdowns being applied over recent weeks are some of the largest percentage mark-downs ever seen in any sector. For those wools meeting buyer specifications, all crossbred fleece wool's were upwards of 20ac clean/kg dearer by the close.

Another 47,000 bales go to auction next week, and as mentioned throughout this summary, the foreign exchange rates are on all minds. The Australian dollar continues to surprise by forging upward against all major currencies, making life difficult for forward sellers to offer any substantial quantities overnight as by the morning the rate could have moved considerably against them. Given the strong resistance, wool prices showed this past week we should fully expect the market to at least hold and maybe gain with the dwindling supplies of Merino types.

Southern Aurora Wool forwards report

This week’s forward market reflected the value of having hedging levels in the market as sentiment ebbed and flowed. The AUD/USD traded in a wide band and the auction market moved around on variations in quality and quantity of supply. Both buyers and sellers continue to battle with the option of certainty of price against the chance of missed opportunity. This was particular noticeable in the finer microns with trading ranges this week in the prompt months varying by 20 to 30 cents.

The current curve reflects the concern of the trade on the ability of the market to hold medium to longer term at these historically high levels. It is anticipated that trading ranges will remain volatile in the near term. On the fine wools we expect pre Easter demand on 19.0 to deliver a trading range in March and April of 1700 to 1735. May and June could see a wider range of 1660 to 1700 reflecting the cur-rent time risk. On 21.0 micron we could see a band from 1390 to 1410 pre Easter and 1370 to 1400 as we move to seasons end.

New season levels were patchy throughout the week although it was pleasing to see trades in 18.0 and 19.0 microns. Both these trades were over the 85 percentile band for their micron category which is an excellent starting point hedge 15 months forward. Options for 19.0 microns traded for May at a 35 cent premium cost and a 1675 strike delivering fair value on current volatility modelling.