Australian wool markets were dominated by large adjustments this week in the Merino sector. Unfortunately, this was all to the negative side, flowing on from the weaker conclusion to the previous week’s selling. Price levels were highly variable from the outset on all Merino wools, with large discrepancies apparent on relatively minor difference in tested specifications. By the close of selling, all Merino types were being quoted at a general 60ac clean/kg lower, whilst the carding and crossbred sectors were far less affected and remained unchanged to 20ac cheaper. The AWEX Eastern Market Indicator (EMI) fell away 44ac clean/kg from it’s highest ever recorded level to 1502ac clean/kg.

Demand for prompt and short term shipment appears to have been met for the interim. After weeks of highly escalating market levels, the Merino wool values also seemed to hit a price point that just could not convince manufacturers to book for-ward contracts at these rates. Subsequently prices could not be sustained, as local auction buyers quickly interpreted the radical change in sentiment and reverted to safety mode by just cherry picking the selection at ever decreasing buy in levels.

Aiding in the particularly awkward and rapid change in direction were that local auctions have recently been loaded up weekly, at short notice, of volumes between 10 and 20% more. This push of quantity onto the market was not over the top by any means but is indicative of the fragile nature of the demand v price relationship, relative to the immediate wool availability. This extra volume assisted in easing purchase pressure on sale room opera-tors and in a shorter time frame than originally forecast. Many of the local exporters, and more importantly, our overseas users had fully expected the maintenance of the price at least until the upcoming Easter break in a fortnights time.

Price levels in the Merino segment were being quoted on aver-age as 60 to 80ac clean/kg cheaper, but the make up of those published indicators actually mask the micro movements within those micron brackets. In the better types suitable for European and Indian delivery of 19 micron and finer, prices were actually almost fully maintained for the week, albeit in the minor quantity available. The major Italian operator was unbeatable once again, particularly in the 17.5 to 19 micron area.

Away from those better wools, price nuances were radical as well with FNF types (less than 1%vm) of all microns holding on comparatively well at just 25 to 30ac lower whilst the lower specified and higher vm (more than 1%) wools were hardest hit and well over 100ac clean kg cheaper for the week.

All carding types remained well sought after and prices avoided the downturn experienced in the longer wools. The comeback and crossbred wool (25 to 30 micron) were also sold to a much better tone and prices were just 5 to 15ac clean kg lower.

49,000 bales is to be offered next week which will surely test again the ability of the market to hold prices at current levels. Passed in rates were high this week, but that in some degree was due to rapid movement as opposed to price. All 3 centres are in operation, with Melbourne offering 55% of the offering.

AUD Commentary - SAW

The Aussie Dollar mostly had an up week, helped by rising Iron Ore and Oil prices, lifting from Tuesday’s low of .7585, to a high Thursday of .7680, before easing Friday to .7640 on a rebounding USD. The rise in USD was triggered by a better than expected GDP release of 2.1%, and that was helped also by a solid rise in consumer spending, up 3.5%. Over the last few weeks there has been a steady stream of data releases out of Europe and the U.S indicating the global economy is picking up real momentum. After slowing in March, US Equities still managed to post a 5% gain for the first quarter. Many Commodity prices have rallied, including Base metals and Oil, which is now back above $50 barrel. Europe M&A activity in surging, posting a yearly increase of 16% to $US215.3 billion, as cheap valuations and some positive economic indicators fuel the takeover appetite. Activity was mostly driven by US companies who spent a record $US114.3 billion in the quarter. On the flip side however, in Australia, JP Morgan still has two RBA rate cuts pencilled in for this year on the basis that inflation remains below the RBA target, Job growth is stagnant and the growth outlook remains weak. Technically the AUD is still range bound, failing to break strong overhead resistance at .7750, while finding minor support at .7580, and substantial support at .7460.

Southern Aurora Wool forwards report

The cautious note expressed by buyers on the forwards last week was justified as the spot market gave back some of it’s strong gains of 2017. The 19.0 micron index opened the New Year at 1622 and completed it run at 1959 last week. This week saw a 4% retracement to 1885. The 21.0 index gave up 5.5% settling near it New year opening of 1412.

Forward prices held relatively well as the market had factored in the expected pull back from historically high prices especially on the finer wools. Forwards are still trading in the spring at high percentile bands. The 95 percentile band for 19.0 sits at 1650. September and October 19.0 traded between 1700 and 1750 early in the week. Bidding at the close of the ranged between 1700 to 1720 in September and October falling to 1650 in November. The 21.0 closed with Spring bidding ranging between 1360 and 1370 which is just below the 85 percentile band of 1375. We expect these levels to hold prior to next weeks auction series as buyers gauge the offshore demand and the market looks to find a base.

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