Australian wool markets mirrored the downturn that was regis-tered last week but a rather stunning reversal of fortune to the positive on the final day gave cause for some optimism. Despite the rally on the final day of selling, all Merino types were being quoted at a very general 60ac/clean kg lower level for the week. The carding segment became embroiled in the weaken-ing market and recorded a general fall of 40ac/clean kg whilst the crossbred sectors was again far less affected and remained firm to 10ac dearer.

The AWEX Eastern Market Indicator (EMI) fell away 43ac clean/kg or 2.8% to 1459ac/clean kg. When measured in US cents the EMI fell away even further by 4.4% to the 1100 usc/clean kg level. This lower value in the US EMI will surely entice those overseas using US dollars to buy back into the market.

Again it was the Merino sector that came under the closest of scrutiny. The start of the selling week was met with great buyer resistance. In a most difficult day for sellers, most sale room buyers took a wait, see and let it fall approach. Unlike last week where variable and erratic pricing was the most noticeable aspect of the auction market, this week was played out by what looked like a more measured step down by those buyers willing to participate in purchasing. Other buyers were completely risk adverse, and chose to simply sit out, allowing the braver competition to snare some quantity at advantageous levels.

The strength of the final day’s prices were somewhat unsurprising for most operators. The increased competition invariably reflected a truer state of the demand scenario and buyers forward sold positions. A “floor” in prices had appeared to have been met and were built around the 19.5 and 21.0 micron price points. Once stability transpired around this area, buyers became more confident in setting buy-in levels across the whole range of Merino types. A substantial re-emergence of buying by a major top maker also gave the sale rooms an extra degree of confidence to resume normal operations.

It is quite noticeable in the Merino segment that the better types suitable for European and highly specified Indian delivery of 19 micron and finer have remained relatively unaffected by the downturn of the past 2 weeks. Again this week, the major Italian operator was dominating the sale rooms on these wools, and barely a lot went to their competition in both Sydney and Melbourne. This week their range increased to also include the best sale lots from 16 to 17 micron, which added to their al-ready in place stranglehold on the 17 to 19 micron area.

Next week will see the Australian auction sales be held on Tues-day and Wednesday to fit in with the Easter celebrations. The Sydney sale will be held off site at the Sydney showgrounds as part of the Royal Agricultural Society Easter Show. 46,000 bales will be offered to the trade nationally and a flow on of the more committed approach to buying witnessed on the final day of this week is expected from the auction participants. The following week will be a NO SALE week and that will be followed by a resumption in auctions where 47.000 bales is currently rostered.

AUD Commentary - SAW

The AUD is trading Friday near it's weekly low at .7540, after starting the week near the high of.7640. The charts show the Aussie has been steadily edging lower for the last 8 days. Recent data shows the ground shifting under the Aussie Dollar, as suggested by the RBA Chief Dr Lowe on Tuesday, after the release of the April Monetary statement. In that Dr Lowe expressed concern over the near zero growth in Australia’s employment, wages growth, retail sales, investment and inflation. That was in line with the research of a number of leading market Economists who still predict that the RBA will be forced to cut rates later this year. Philip Lowe said the “ongoing increases in record indebtedness and rising housing prices” were a "risk to the whole future health of the Australian economy. Stretched balance sheets make for more volatility when things turn down” he said. The bright spot has been Agriculture, as Australia’s trade surplus rebounded to $3.6 billion in February, the second largest on record, however a large part of the surplus was due to the sharp 5% tumble of imports, more than a surge in exports. Technically the Aussie is still contained within a large trading band, with support at .7480 then at .7360 and key overhead resistance of .7750.

Southern Aurora Wool forwards report

The deep retraction in prices in the auction had only a minor impact on the forward markets. Prices for came off around 20 cents while the spot market reduced 50 to 80 cents particularly in the finer microns. Most forward interest surrounded the 18 and 19.0 microns as buyers held their forward prices, especially into the spring, having anticipated the fall as demand became constricted by historically high levels.

Volumes were low as both buyer and seller struggled to ascertain fair value with such volatility. 19.0 microns traded close to their cash level for May and June (1800) and at 1725 into the new season. More growers were looking to options to manage their risk this week. Their strategy was to pay between 2 and 3 percent option premium to protect their downside while being able to participate should the market reverse the current downward correction.

We expect bidding interest to be maintained at these lower levels as we move into the Easter recess. Anticipated Trading levels next week

May/June 19.0 1770 to 1790 and 21.0 1360 to 1370 August/September 19.0 1710 to 1730 , 21.0 1330 to 1350

Industry News

AWTA Key Test Data Summary for March 2017

• The monthly comparisons for March 2017 compared with the same period last season show that there has been 14.2% more bales and 14.2% more weight tested by AWTA Ltd (Australian Wool Testing Authority Ltd).
• The progressive seasonal comparisons for July 2016 through to March 2017 compared with the same period last season show that by bales there has been 4.2% more bales tested and by weight, 4.6% more kilograms tested by AWTA.
• For this current season so far, AWTA has tested a total of 279.4 mkg (million kilograms) this season compared with 270.0 mkg over the same period last season.