Australian wool auctions performed admirably this week, not by increasing price levels, but by holding very firm in the face of the heavy volumes hitting the market. Buyer expectations of a cheaper market were largely unmet, with all types and descriptions on offer recording just minor adjustments downward. The rebased AWEX EMI (eastern market indicator) decreased by just a single cent to close the week at 1524ac/clean kg.

The selling week commenced with buyers basically bidding to a level through the Merino fleece section, and not pushing to buy at all. As such, prices slowly drifted without cheapening that much. From the outset of selling, the main Chinese indent operator (name changed) seemed to be more active than the past month or so. The largest volumes seen at auction for a few months was no deterrent as that operator accumulated volume rapidly. It soon became apparent to their competition that they were not slowing in their purchase intent so those local trader exporters had to exercise more muscle in order to acquire inventory to settle sold positions or provide future trading fodder.

Apart from the top 2 buyers, it appeared that most buyers of Merino types had a very similar attitude in their purchasing strategies. The majority were focussed on sticking rigidly to the buy-in price levels they had in mind, rather than volume. New business was reported as being sporadic early in the week, but as auction prices failed to fall away as expected, more and more interest was being shown by overseas users. By the close of selling, demand had appeared again and looks set to take the wool market into a very solid conclusion next week.

All of the merino skirting types were extremely well sought after and some gains of 20ac/clean kg were extracted from buyers on those lots of less than 5% vm (vegetable matter). Cardings of all descriptions depreciated by around 1% as orders were being filled, and buyers showed reluctance to carry stock into the upcoming recess. Crossbred types at the finer (less than 28 micron) end were firm unchanged whilst a slight fall at the broader end (30 micron plus) occurred as negative reports of high greasy stocks in other producing nations emerged.

Next week sees more than 47,000 bales go up for sale and expectations of a good market are commonplace. A three week recess in auction sales in Australia follows .

AUD Commentary - SAW

The Australian Dollar opened the week in a buoyant mood, following on from hitting fresh three month highs the previous Friday, and was well supported at Monday’s high of .7690. The Aussie held relatively firm there till Tuesday afternoon’s release of the RBA Board minutes, which precipitated a sharp fall, carrying the Aussie to Thursday’s, and the weeks low of .7570. Today, Friday the Aussie is a shade firmer at .7585. Technically the Aussie remains trapped within a large trading band, and this week’s earlier rally was unable to breach the topside or the longer-term trend-line resistance extending off the 2016 highs, currently sitting around .7705. This threshold is backed closely by strong resistance zone at .7756. Both of these regions previously were exhaustion zones, and as suggested last week represented good short entry points. The quick fall in the Aussie this week is likely to be followed by a small bounce higher, possibly back to .7650. While the chart suggest a lower Aussie, for the time being the market is not offering any clear buy or sell signals. Chart support for the Aussie is found at .7560 then .7480.

Southern Aurora Wool forwards report

Another week of uncertainty in both the forward and spot market. We head into the last round of sales with both buyers and sellers reticent to commit. Buyers are unable to find any clear signals from the down-stream processors. Outright sellers are not prepared short the market at the risk discount buyers are asking at the historically high prices. Highlights of the week were August trading at 1500 and above and the hedge setting of 21.0 out to September 2018. Only a small percentage of growers seem to place sufficient value on the certainty of price protection into the future even though they would be hedge and locking in significant margins. The current monthly hedge open position both outright and options as a percent of the monthly offering.

There appears at present to be little weight given to the value of certainty over the fear of lost opportunity. We expect next weeks auction to continue the same pattern. Slight easing of prices into the recess

INDUSTRY NEWS

AWEX EMI (Eastern market indicator) rebased

AWEX has completed its periodic review of the structure and pro-file of the AWEX Market Indicators. Minor changes were made to the Indicators, with the fining of the Merino clip the largest positive influence to increase the levels pre the start of this week.

AWTA Key Test Data Summary for June 2017

The monthly comparisons of total bales and weight for June 2017 compared with the same period last season show that there was 11.9% more bales and 11.8% more weight tested for the month.

AWTA Key Test Data Summary for Season 2016/17

The progressive comparisons of total bales and weight for July 2016 – June 2017 revealed a 4.9% bales increase and 5.3% weight increase of wool tested during the 2016/17 season compared to the previous year.

AWTA Ltd tested a total of 357.9 mkg (million kilograms) for the 2016/17 season compared with the 340.1 mkg tested in the previous season of 2015/16.