Sales this week in Australia featured the final designated super fine sale of the season and buyers certainly attacked the better selection on offer with plenty of enthusiasm. Strong purchasing from Italian interests was in evidence, but forward and spot traders also participated keenly. This sector alone assisted greatly in seeing the AWEX EMI (Australian Wool Exchange- Eastern Market Indicator) advance 10ac to 1830ac/clean kg. This figure represents another weekending record high and earlier in the week on Wednesday a daily record all time high of 1834ac/clean kg was set.

In US dollar (USD) terms, the EMI was 6usc or 0.4% lower at 1415usc/clean kg by the end of selling, outperforming the exchange rate loss. The forex (foreign exchange) rate in USD v AUD was 1% lower for the week, thus showing the slightly improving demand sentiment that was communicated around the trade for the week. The fall in USD was half of the theoretical magnitude. In addition, the ruling rate as auctions were being conducted, was 0.5 higher at around the .778 mark as opposed to the week ending reporting level of .773.

The super fine and ultra fine (finer than 18 micron) Merino fleece sector enjoyed good gains this week. General quotations were raised by 35ac/clean kg, but the speciality lots exhibiting spinners and best top making qualities were 60 to 90ac dearer. It was mainly Italian indent orders that kicked these types further away from the mainstream values but notably restricted to just the 17 to 18.5 micron range. For the 16.5 micron and finer types though, competition came from all quarters, and quite often the Italians were outbid. A small offering of sub 16micron types attracted the most attention and over 100ac gains were made.

The mid micron Merino fleece types (18 to 20 micron) had some variable results between selling centres. Values at the Melbourne centre pushed 10ac higher but both Sydney and Fremantle fell away 20ac for the series. At the close, Melbourne was quoted as being generally 20ac better for price than Sydney for this area. For the selection of Merino fleece broader than 20 micron available, Melbourne and Fremantle provided the large majority of the offering and both these centres reported gains of 30 to 50ac/clean kg, with the largest price gains around 22 micron. Merino skirtings and cardings were irregular throughout but generally closed around similar levels. The finer (less than 30 micron) crossbred wools gained 15 to 25ac, but for the broadest (30 micron plus) wools fell away 15ac.

Generally it was a very good week to sell wool but this week’s activity was once again influenced largely by the state of buyer finances. Of some concern was that some sectors of the market fell away badly towards the close as funds became sparse. Quite a few sale lots became somewhat neglected and discounts of up to 60ac/clean kg were being evidenced. This easing was evident mainly on lots with tested data showing high pobM (position of break in middle) and the consequential higher calculated cvh% (co-efficient of variation hauteur) result. Whilst the volume of wool sold at the lower levels was rather small, it is significant and not indicative of the true market demand, particularly as the “better” tested lots held up strongly through to the close.

Over 46,000 bales is up next week and this will not only test the prompt demand, but also buyers finance abilities.

Australian Dollar Commentary - SA Markets

The Australian Dollar was under pressure all week, falling from Mondays high of 7890, through to Thursday nights low of .7714, before a small recovery Friday to .7765. While the AUD fell against the USD, it dropped much harder against the cross-currencies. The announcement from President Trump that the U.S will now impose Tarrifs on imported Steel and Aluminium, triggered concerns of a trade war, and the Commodity currencies took a hit. The AUD was helped over-night when the US Federal Reserve Chair Jerome Powell said that “ he sees no signs the US economy is overheating yet, and for the moment there was is rush to move monetary policy.

Technically the AUD still remains contained within a large trading pattern, with support at .7708, then .7642 and then.7508. On the upside resistance is found at .8010, then .8145.

Wool forwards report - SA Markets

A hesitant week for both the auction and forwards this week. The lack of direction was evident in the forwards all week. Buyers were reluctant to take on risk and the modest trades were restricted to the prompt month. Interest post Easter and into the new season waned as off shore buyers showed little confirmation of acceptance of these levels. Supply concerns suggest that the market has limited downside but history shows that the key driver is demand. The level of demand destruction due to increasing prices is difficult to ascertain. Even a correction of 10% would still see the market maintain the upward channel that merino qualities have enjoyed for the last 4 years.

With similar quantities on the market next week the market direction will again be influenced by the expectation and assessment of new demand and the extent of financial pressure exerted on exporters to fund working inventory at these price levels.