The Australian wool market appeared to find a base this week, as some sense of stability returned to auctions. With available wool quantities down due to Fremantle not having enough wool to offer and the AUD strengthening significantly against the USD and Euro, most thoughts initially centred firmly around a cautious approach to any purchasing. Primarily, the price movements early in the week were all negative as levels decreased further in the Merino sector. Buyers were not convinced the basis for fresh trade had been met.

The turnaround on the final day was obvious for all to see. The small amount of fresh business intent that had been steadily rising since the end of last week triggered a reversal of some significance, albeit not across the entire offering. What did change though was buyer sentiment, as almost all operators were suddenly keen on inventory acquirement and closing out of their outstanding open positions. The standard traded types were the most sought, and within these descriptions, those lots testing FNF (free to near free - less than 1%vm) of all microns were being chased hardest, causing the majority of the rises.

The AWEX EMI (eastern market indicator) increased by 6ac/clean kg for the week to close at 1478ac/clean kg. At the same time last year, the EMI sat at 1270ac/clean kg so we are now 16.4% higher year on year. The AUD strengthened by 2% this week and this saw the EMI go 2.4% higher when measured in USD to 1116 usc/clean kg.

Merino types broader than 19.5 micron were all in sellers favour from the outset. Buyers have been ardent to stay in touch with the market and accumulate the necessary volumes to satisfy the demand. All descriptions of this quality area has been remarkably steady in the face of the declining levels of their finer counterparts. Demand pressure has seen the 21 MPG (micron price guide) once again move over the 1500ac/clean kg mark in Sydney and fall just short of that figure in Melbourne. Those types finer than 19 micron had mixed results across both operating centres, but by weeks' end a rather stagnant market in Sydney and a 30ac dearer market in Melbourne saw quotations from both centres the closest to they have been for some months. Fine Crossbreds were dearer and broad crossbreds just slightly off. Cardings were well maintained once again and generally unchanged.

Next week has Fremantle back in action, but just over 30,000 bales total is available nationwide. The stronger buying interest was pleasing to see and hopefully the stability can remain.

Industry News

AWTA Key Test Data Summary for May 2017

• The monthly comparisons for May 2017 compared with the same period last season are: 23.5% more bales tested and 23.0% more weight for the month.
• The seasonal progressive comparisons for July 2016 – May 2017 compared with the same period last season reveal 4.5% more bales and 4.8% more weight tested for the season thus far.
• AWTA Ltd has tested 335.0 mkg (million kilograms) this season compared with 319.5 mkg for the equivalent period last season.

INDUSTRY NEWS - WOOL EXCHANGE PORTAL

The AWI Wool Exchange Portal working group (WEP-WG) has endorsed the construction and implementation of a digital wool ex-change platform for the longer-term benefit of the Australian wool industry. The business case developed by the group has identified $38 million in consolidated industry benefits over the first 15 years of such a digital selling platform. WEP-WG Chairman, Will Wilson has presented the group's findings to the AWI Board. The main recommendation being to now move to the "discovery phase", where industry moves to build the portal.

The WEP will deliver greater pricing efficiency and increased competition within the wool selling system as well as providing all industry participants with a one stop port where all buying and selling options can be transparently evaluated and future price realisation mechanisms can be accommodated and made available.

The WEP-WG has proposed to now engage current online commodity market operators to help develop the WEP and has already received proposals from 10 potential vendors. This allows industry to target specialty service providers to best fit the various offerings that that WEP will aim to provide. It will also be a more cost effective use of funds and reduce the likelihood of duplication where certain software may already exist. During this discovery phase the project team will work with the selected vendor to generate the following:

• Detailed functional requirements specification (utilising user scenarios / stories);
• Detailed solution architecture (including data integration requirements);
• Change management strategy and deployment plan;
• Detailed integrated implementation roadmap including finalised resource plan;
• Operating Model design and strategy (including decisions regarding the commercials to access the required historical and current data) to be defined.

AUD Commentary - SAW

The Aussie Dollar has managed to negotiate a huge data week, coming out mostly higher and unscathed, and is trading today, Friday at .7540, well up from Monday’s low of .7430. The AUD is still stuck in a broad trading range, with the first key support at .7340, and overhead resistance at .7625 and 7760. The present rally may extend to .7610, but is likely to struggle to trade much higher. The charts still indicate a big picture struggle for the Aussie, with a higher likelihood of a retest of the lows of .7150

Southern Aurora Wool forwards report

Interesting week with both buyers and sellers battling to find a fair value mid point to trade. Fine wools again looked under pressure and buyers were reluctant to commit forward. Medium microns held early in the week and bids remain around cash in the front months and 1400 through to the spring. The stalemate was broken on limited volume towards the end of the week with August trading at 1425 and 1430. Hopefully we will see that pull through backed up with some off shore demand signals. This is essential for the market, especially in the fine wools to reverse the downwards trend of the last three weeks.