Yet another historical week at Australian wool auctions which has seen the AWEX EMI (Australian Wool Exchange - Eastern Market Indicator) weekending figure record broken again for the 12th time this season. The strong price surge of last week was seen and raised for all sectors of wool on offer, with all micron bands recording impressive gains. This keen interest smashed the EMI through the 1700 ac mark to close at 1760ac, a lift of 61ac clean kg. This surpassed the previous record high of 1699ac level hit just last week.

The major Forex (foreign exchange) rate used in wool trading, the USD, also jumped up this week, closing 1.6% higher. When isolated to just USD movements, the USD EMI gained 67usc/clean kg to close at 1349usc clean/kg or 5.25% stronger.

The market this week was full of anticipation as buyers and growers alike were interested in what the final week of selling for the calendar year would bring. The sentiment for the week was that prices still had room to grow, and from the start of selling, competition was high to secure bales before the Christmas break. With record high wool prices and many growers now entering a 6-8 month shearing pattern, there is some uncertainty regarding the availability for some wool types in the new year and so competition was high to secure them before the break. The week began with a stand-alone Melbourne sale on Tuesday which saw an early indication to what the week might bring, as prices jumped +20-+30ac.

By Wednesday, it was apparent that demand for all wool types had released the brakes and went on to comfortably exceed the sale results of the day previous. Incredible gains were recorded for super-fine and crossbred wools as buyer interest pushed these micron bands up 40-60ac. However, it was fine wool that attracted the most heat, causing some staggering changes of +100ac clean/kg.. The EMI hit a high of 1765ac clean/kg.

Thursday pulled the reigns back slightly as the market somewhat adjusted to the increases of earlier in the week. Superfine wools came off 10-15ac, fine wools -25ac while Crossbred wools and Meri-no cardings added 5 go 10ac clean/kg on an already impressive week. The EMI came of just 5ac clean/kg to close Thursday at 1760ac clean/kg and finish the calendar year at a record level.

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 continues to remain firmly in play. This may well point Australian wool prices to further positive territory into the new year and see growers receiving just rewards for their efforts.

Australian wool auctions will now enter a 3-week selling recess over the Christmas break, and re-open at the beginning of January. AWI wishes you a very Merry Christmas and hope you have a safe and wonderful new year.

AUD Commentary - SA Markets

The Australian Dollar surged higher this week, rallying 167 pts off Mondays open at .7508, to be trading today, friday at .7675. There were two key drivers of the rally, but the most impressive was Australia’s stunning employment report. The ABS Data showed 62,000 new jobs were created, more than triple of expectation of 18,000 jobs. Full time jobs grew 42,000 while part time jobs grew 20,000k. CommSec’s senior economist Ryan Felsman said there is a jobs "record in sight". "More Aussies are looking for work. More people are finding work. More employers are hiring workers and seeking employees,” he said. "In fact there have been 14 straight months of job gains. The longest stretch ever is 15 consecutive months from May 1993.” Nonetheless, there is no change to the general view that RBA will stand pat throughout 2018, unless there is a pickup in wage growth and a lift in inflation. During the week also data from China showed Retails Sales firm with a 10.2% growth year on year. The sec-ond surprising driver was the sell-off in the U.S Dollar immediately after the Fed lifted its benchmark interest for the third time this year, on Thursday by 25 basis points to 1.5% , the same as the RBA’s bench-mark. The rate rise was fully expected, and after all it confirms the Feds vote of confidence in the expanding US economy. NAB’s curren-cy strategist Rodrigo Catril said the U.S Dollar was undermined at the same time by the release of very weak core inflation data (which excludes food and energy) which showed a tiny rise of 0.1 per cent in November, instead of the 0.2 per cent expected, taking annual core inflation to 1.7 per cent, undershooting the Fed’s 2 per cent target. The language also used by the Fed suggested there may be limited rate rises next year, possibly not the four the market currently expects. On the flip side the Fed lifted its GDP forecast from 2.1% to 2.5%, while the unemployment rate was projected to fall in 2018 from 4.1% to 3.9%.

SA Markets wool forwards report

After an extra ordinary opening to the final auction week the market prior to Christmas the market closed on a weaker note for most merino qualities. The forward markets benefited from the volatility as new record hedging levels were set across numerous microns. 18.0 microns traded at 2255 in April, 18.5 2150 in March, 19.0 2025 in April and 21.0 1705 in February. Buyers were most interested in the early New Year but lack of selling volume saw trading move as far out as August 2019. Good volumes traded for the spring of 2018 . We go into the break with some negative sentiment from off shore but with buyers still concerned by supply issues into the early New Year. We anticipate light trading next week with exporters looking forward to a break after a volatile six months. We expect some opportunities to hedge with growers looking to take advantage of near record closing levels.