In light of the intense activity of the past three or four weeks at Australian wool auction sales, the market produced a rather mundane result this week. Whilst some of the finest Merino microns showed some negative price tracking, the majority of the offering, which was 18 to 22 microns, was largely firm to unchanged and traded strongly throughout. Similarly the cross-bred and carding sectors produced very little change in their values over the course of the selling week.

The AWEX EMI (eastern market indicator) finished the week at 1556ac/clean kg which was just 2ac lower than the previous weeks close. The weakening USD caused the EMI when expressed in USD to gain 12usc clean/kg or 1.1% which was wholly due to the stronger AUD v USD exchange rate. Interesting to note that on the same week of selling last year, the EMI stood at a level of 1305ac, so as of today the AWEX EMI has appreciated over 19% in just 12 months.

Values for the best super fine types could not be sustained at the extremely good levels that were extracted from the Sydney designated super fine sale of last week. Competition was softer from the outset, and whilst the Italian orders remained in place, the trader interests was far less urgent and so prices drifted downward by 20 to 30ac on each of the sale days. Even so, the premiums above the normal run of the mill types remain substantial and well worth the additional preparation efforts.

The benign local markets somewhat masked further buying interest from overseas. Whilst European and Indian business was described as being sporadic, consistent enquiry emanating from Chinese interests provided many opportunities for those exporters in a position to be able to take on further orders. This week was notable for the seemingly price sensitive nature of any new business, with the worsening currency in regards to USD rates being somewhat problematic for exporters getting full market rates for new wool contracts.

Auction sales next week in Australia have on offer around 44,000 bales . Forward sales, some new business being written combined with the ever present and strong Italian and Chinese indent orders should hopefully see prices basically hold their levels as the peak volume period of Australian production gets into full swing. Obviously some variances in individual types and descriptions will occur, but most of those directly involved in trade are optimistic about the immediate prospects of Australian wool.

AUD Commentary - SAW

The Australian Dollar was a big beneficiary of a falling USD this week, rising Friday to a 3 month high today (Friday) of 8048, and closing quickly on the two-year high of .8065 struck in late July as the USD fell especially hard against the Euro, Yen and Pound this week from a range of factors including a possible slowing in the U.S Economy from comments by Lael Brainard, a voting member of the US Federal Reserve said “We should be very cautious about tightening policy any further until we hit our inflation target,”, he was backed up by Neel Kashkari, Minneapolis Fed Reserve President who said he was worried “that previous rate hikes delivered, may actually have done damage to the US economy”.

It was the reverse in Australia, with a big data week of mixed but generally supportive numbers showing a slowly growing economy. Data from the Bureau of Statistics showed that retail sales in Australia came in roughly unchanged in July at A$26.113 billion while the ABS also released Australia’s trade figures, showing a surplus of A$460 million in July, however that was down 48 percent on the month and missing the forecasts A$1.000 billion surplus. The key Data this week was the GDP release on Wednesday, which saw Real GDP rise by 0.8%, slightly below the 0.9% forecast. The summary by most economists seems to say low wage growth, low savings and high debt levels are holding back growth and households remain a ‘key risk’ to Australia’s economic outlook. GDP Data showed the nation’s household savings ratio, fell to 4.6% in the June quarter, leaving it at the lowest level since before the global financial crisis. Paul Dales, Senior Economist at Capital Economics believes the GDP data overstates the health of the economy, and that year on year growth is more likely about 2.2% a year, and says if correct the RBA will be forced to keep interest rates on hold at 1.5% until late 2019. Unfortunately for exporters and Farmers the Aussie Dollar Charts suggest a strong break higher is close at hand, if the market cracks above short term chart resistance of .8160

Southern Aurora Wool forwards report

A quiet week on the forwards with exporters looking for confirmation of stability at these high levels ahead of better supply into the early spring and summer. Trade was limited to 21.0 in October at 1560 and December at 1520 but again in excess of the 95 percentile. 19.0 microns traded in the post Christmas period with growers achieving 1800 cents for both January and February and 1765 for April. Exporter interest in the New Year fine wools diminished as they weaken through auction Wednesday and Thursday.