After a reasonably solid start to the selling week at Australian wool auctions, the last day saw that positive tone evaporate and the prices started to wane. Negative forces combined late in the week, whereby a selection of harder to place wools were on offer in the two eastern centres. The Merino wools were mostly and heavily influenced by high VM (vegetable matter) levels. Additionally the exporters were finding it difficult to attract much prompt business as the substantially weaker AUD v USD rates meant much cheaper offers were flowing into China which perhaps gave some incentive for those needing to buy a reason to wait for further reductions as is quite often the case.

The AWEX EMI (eastern market indicator) actually gained 5ac on the first day of selling, but lost 15ac on the last day to see a net retraction of 10ac/clean kg for the week. The EMI closed at 1534ac clean kg. As a positive for local sellers, the USD EMI dropped off 16usc, aided mostly by forex rates, to 1128usc/clean kg which may help attract some overseas buyers back to the prompt market.

Mixed signals were the commentary across the Australian wool show floors again this series. Business demand for the super fine end (finer than 18.5 micron) of the merino sector appears to have become somewhat stagnant, as the ever increasing prices over the past four or so months has appeared to have met some price resistance for users of those types. The very best are still being sought heavily, but these sale lots are low in volume and that low availability is expected to remain that way for some time through Winter and into the Spring.

The two eastern selling centres had a stepped down pricing grid on the Merino sector seeing all categories basically 30ac cheaper for the week. Price adjustments in effect were not that radical, but still met some grower reluctance to sell, and an average pass in rate of 11% ensued. That reluctance was far greater in the WA market though, as the 40 to 60ac cheaper market in that state saw the pass in rates surge to almost 28%.

Away from the Merino fleece sector of the market, it was a much better story. All comeback and crossbred types (25 to 30 micron) managed to stay firm or even add to their values by a margin of 5 to 10ac clean kg. The carding market also defied the cheaper Merino fleece and also gained a general 5 or 10ac clean kg. All the indications see the steady demand remaining in both these sectors, particularly as volumes are starting to drop away in both Australia and South Africa.

Next week sees a smaller volume of just over 36,000 bales scheduled to sell. In fact the next three weeks will see a similar volume around that figure being forecast for sale. A big factor affecting pricing at the moment is the quality of the wool and the types on offer, and this variability will no doubt be a strong influence on prices

AUD Commentary - SAW

It was mostly one way traffic for the Aussie Dollar this week, sliding from Mondays opening high of .7420 and dropping to a 4-month low on Wednesday night of .7330.

This occurred despite the markets generally giving the Australian Budget released Tuesday evening the thumbs up. The AUD cracked support after the release of the weakest Retails sales Data in 4 months, which analysts believe will almost certainly mean that the RBA will be forced to leave rates unchanged for the year, in contract to what is likely to be three Fed Rate hikes this year.

The Australian Bureau of Statistics Data showed that the retail sales in Australia fell 0.1 percent on month in March, missing the forecasts increase of 0.3 percent.

The USD also lifted late in the week, climbing to a two-month high against the yen as risk appetite improved following the French election. Fed funds futures show a 90% chance the Federal Reserve will raise U.S. Rates at next months meeting.

The U.S Dollar Index, tracking the greenback’s value against six major currencies, rose to a three-week high, in line with the gains in yields. James Chen, head of research at Forex.com said the USD should remain supported in the near term because of a generally stable U.S. economy and a Fed that is on a distinct tightening path.

AUD/USD Technical Report:

With 0.7440 minor resistance intact, bias in the AUD/USD remains on the downside. There is small support seen at .7320, and a stronger support at .7280. A break of that would see the Aussie fall quite sharply to .7160 then 7080.

Southern Aurora Wool forwards report

Southern Aurora Wool Report 11th May 2017

Sentiment changed rapidly during the week with the high prices strangling forward demand. Low auction volumes and a weak Australian Dollar could only hold the spot prices temporarily. Pricing into the spring was less keenly sort this week by buyers but levels remained healthy for growers looking to hedge.

19.0 August traded at 1870 but bidding interest soon waned. The same pattern appeared in the 21.0 microns with trading levels from 1415 to 1435. We expect bidding to be muted prior to the auction next week but opportunities should arise around 1400 throughout August and September on 21.0. Finer wools are harder to predict at the current levels. Early indications for 19.0 have August at 1830, September 1750 and October 1700.