Sentiment this week at Australian wool auction sales changed course to the positive. After spending a a few weeks in reverse, wool values lifted once more due to a slight improvement in prompt demand, lighter volumes on offer and an advantageous forex (foreign exchange) rate. Most types and descriptions recorded gains almost to the cent of the forex differentials, except 19 to 21 micron Merino fleece which broke out beyond the percentage currency gain, indicative of some fresh demand. The AWEX EMI (Australian Wool Exchange- Eastern Market Indicator) regained all of the losses of last week and appreciated by 27ac for the week and closed at 1778ac/clean kg.

Overseas customers would have thought that they had a lucky break with the all of the major currencies opening the selling week at over 2% to their advantage. The local wool market immediately kicked up by a similar magnitude but some of the keener overseas buyers had already locked in at the cheaper delivered price in USD and other currencies. After such a turbulent few days of forex fluctuations, the EMI movement when expressed in US dollars was far less excitable and ended up being just 2usc lower at 1377usc/clean kg.

Merino wool movements this week were all positive with buyers very keen on wools with the better tests or containing light VM (vegetable matter) readings. This demand was witnessed across all micron brackets and gains on these wools was initially 60 to 80ac but a pullback was recorded on the final day as sale rosters were released showing a massive increase of over 21% or 8,000 bales for next week. A strengthening dollar also slowed interest, but it was primarily the pressure relief of more wool than expected available for prompt buying that hampered the rising market.

The Crossbred sector had a good week as well, and price gains of 20ac/clean kg were recorded. Importantly it was the better prepared clips that took the best possible money out of the buyers pockets as unskirted clips remain relatively out of favour and copping discounts above and beyond what it would have possibly cost to prepare the clips to the code of practice. Cardings enjoyed similar gains of 20 to 30ac/clean kg.

47,000 bales is rostered for auction in Australia next week. The market was hitting a price point late in the week that appeared to top out, but the large volume will no doubt test current demand levels.

Australian Wool Innovation (AWI) has launched the first phase of the WoolQ portal . Register now at www.woolq.com

The WoolQ portal (formerly known as The Wool Exchange Portal) allows the wool industry to embrace digital opportunities to achieve future growth and efficiency. WoolQ emerged from the concept of a Wool HQ - a digital headquarters for the Australian wool industry where information, data, selling choices and trading opportunities are visible and accessible in the one location to woolgrowers, their agents and other industry professionals in a single online destination.

Wool forwards report - SA Markets

The spot auction found support this week due to the falling Australian Dollar. The EMI closed the up 27 cents reversing the losses of last week but closed slightly lower in USD terms. The forwards traded in very light volume with exporters failing to find consistent new demand at the high spot levels. The trades that did occur were at very attractive levels. In the prompt month 19.5 traded at 2065 (60 above cash) and 21.0 at 1875. These were well above anticipated levels with the strong USD helping add 40 cents to the mid microns on Wednesday. Fine wool traded in the Spring. 17.0 September 2590 and October 2570. 18.0 October at 2180 highlighting the value of having strategic orders in the market as demand ebbs and flows.

Direction from here is difficult to predict. The history of the last two years would have the market looking to find a level to rally off as it has done more than a dozen times in this period. On 19.0 micron those pull backs have ranged up to 170 cents. We are currently 110 cents of the February highs. On 21.0 the adjustments have been up to 140 cents. Currently we are only 36 cents under the peak of 1938 set on the 1st March.

It’s important to remember that price is not necessarily the most important factor to a successful business. Managing margin is. Historically wool, like many agricultural commodities can be highly volatile. Such volatility makes forecasting, budgeting and cash flow management difficult thus effecting how the business is perceived and its long-term sustainability.

AUD Commentary - SA Markets

Commodity Currencies and Global Equities fell heavily on Friday on fears of a US-China trade war, as the Trump administration overnight announced tariffs of $US60 Billion on Chinese imports in retaliation to theft of intellectual property. The Aussie dollar dropped 100 points from the weeks high of .7782 back to near the weeks low of .7680. The Aussie was also pressured this week by a fall in key commodity prices and a surprise lift in Australian unemployment numbers. The AUD/USD has now lost over 5.5% since the high of .8135 struck on January 26. This suggests with U.S Rates rising and a possible trade war, the Aussie Dollar will remain volatile and under pressure.

Technically the AUD is contained within a major sideways trading pattern, however within that the AUD is falling within a small down channel, suggesting more downside from here. Next key support is at .7642, while key resistance is at .7915. While that resistance remains intact, a deeper fall is still expected.