A historical week at Australian wool auctions which has seen the AWEX EMI (Australian Wool Exchange - Eastern Market Indicator) week-ending figure record broken again for the 11th time this season. A strong price surge came from surprising sectors of all of the crossbreds and cardings wools on offer, but all wools were strongly sought after. This renewed interest helped lift the EMI 23ac to 1699ac clean kg, outstripping the previous record high of 1689ac level hit 3 weeks ago.

The major Forex (foreign exchange) rate used in wool trading, the USD, also went in favour of local sellers and theoretically added 0.5% of the 1.37% value gained in wool this week. When isolated to just USD movements, the USD EMI gained 11usc/clean kg to close at 1282usc clean/kg or 0.8% stronger. The European users were somewhat disadvantaged in comparison as the Euro maintained the ruling rate week on week and bore the full brunt of the AUD rise at local auctions here and in Euro levels were 1.4% higher.

The market this week went pretty well to the pre sale script, but some somewhat surprising outcomes did eventuate. The slow and weak beginning to sales at the stand-alone Melbourne sale on Tuesday was pretty well expected, and prices were unchanged to slightly off. A large portion of the Tuesday offering was ex- Tasmania and specialist orders for the Island states production ensured those wools were in the buyers sights. This went a long way to maintaining the average prices in the Merino sector, as the Tassie wools mostly sold better than their mainland counterparts.

Mid-week on Wednesday we witnessed a remarkable turn around in the markets fortunes, but it came from somewhat unexpected quarters. Protracted competition built from the outset, but was restricted to just the carding and crossbred sectors. Buyer interest was intense in both these sectors. Some remarkable gains were recorded, and by example, Merino locks gained upwards of 50ac for the day. Growing interest was also evidenced around the Merino fleece sector but just small positive movements were registered.

Thursday was obviously buying day for exporters. Those who had exercised the ultimate patience finally succumbed to their order books requirements for delivery pre Christmas and joined in the auction room action in a big way. This was seen across all wool segments and was largely expected at the start of the week to happen the closer we got to conclusion of selling. Because of those pre sale expectations, the price gains in the Merino fleece were rather measured and added 5 to 10ac for wools finer than 19 micron but 25 to 30ac for Merino wools 19.5 micron and broader. The results were far more dynamic across the crossbreds and cardings, and by the cessation of selling extraordinary gains of 40 to 70ac clean/kg were achieved in both these sectors for the week.

The strong demand for prompt and nearby shipment almost singularly created the strengthening market. The willingness of our overseas users to pay the spot prices augers well for next week and additionally post Christmas auctions. The fundamentals ruling the wool trade at present of growing demand, lack of global stocks in front of machines and affirmative consumer sentiment for wool items remain firmly in play and continue to affect Australian wool auctions positively. Next week sees the final wool sales to be held prior to the Christmas recess. 52,000 bales are rostered to sell and with buyers more cashed up and orders yet to be filled, it is expected a strong run into the three week break in sales will eventuate. There maybe some anomalies occur as export orders are filled, but overall prospects appear bright to break through the 1700ac EMI barrier..

AUD Commentary - SA Markets

It was a roller coaster week for the Aussie Dollar (AUD) , rising Monday and Tuesday to a high of .7656, before falling away Wednesday, to a low on Friday of .7504, a drop of 150 points.

While the release of Australia’s GDP figures mid-week disappointed, the fall on the AUD was more the result of a surging US Dollar (USD). The expectation of success in the passing of President Trump’s enormous Tax Bill has helped propel the USD higher, and along the way sent U.S Stocks to fresh record highs.

Australia’s GDP data disappointed mainly as a result weak increase in household consumption, due to low wage growth and high personal debt levels. GDP growth for the quarter was 0.6% against 0.7% expected and the year-on-year rate was 2.8%, below the 3.0% expected.

Also disappointing was the release of Australia’s Trade Data, with the surplus falling heavily to just $105 Million, which was well shy of the A$1.4 billion surplus expected. Exports were down A$903 million or 3.0 percent on month to A$31.871 billion, mainly from falling Coal and Iron Ore Exports.

The USD is now up for the second consecutive week as growth in the worlds biggest economy continues to pick up, mostly outperforming estimates, except surprisingly on inflation, which has managed to remain benign and is helping to hold interest rates at near record lows.

Technically the AUD is back to key support at .7485, and while a bounce is possible from here, we feel the AUD will remain under pressure in the near term, however we are mindful that the trend of higher lows and higher highs suggests a larger move higher is just around the corner. For the moment support is at .7480 then .7360, while resistance is .7680 and 7810.

SA Markets wool forwards report

The forward market maintained momentum as the spot auction found a base for most microns. Growers took advantage of buyer interest in the first half of next year. The 19.0 micron index cracked the 2000 barrier in February with hedgers locking in at historic levels. 21.0 microns traded above 1625 in March out to 1595 in May.

Buyer interest remained solid all week but on limited quantity with concerns over medium term risk at these price levels. Focus for the coming week will be on finalising pre-Christmas export orders. We expect buyers to continue to add to their first quarter inventory giving growers good opportunities into the first and second quarters.

The first indication of interest in the spring next year came through this week. This was based on early yarn enquiry that translated to index levels of 1800 for 19.0 micron and 1500 for 21.0 micron.