On the surface Australian wool markets appeared to falter somewhat this week, but closer analysis at weeks end shows that alignment of prices across all selling had more accurately occurred. The larger offerings of mainly Merino types allowed buyers to spread their purchasing and this saw a more price sensitive strategy play out. All of the Merino price guides between centres closed at levels remarkably similar and possibly the closest they have been all season. The AWEX (Australian Wool Exchange) EMI (Eastern Market indicator) drifted downwards by 6 cents to close at 1772ac /clean kg which is around 18% or 270ac higher than at the end of March selling a year ago.

A little disappointing was the EMI when expressed in USD (US Dollars). With that currency going in favour of overseas buyers by 0.65% it was less than ideal to see the USD EMI slip by 1% to 1363usc clean/kg. Many trade participants thoughts were the USD price reduction was more reflective of the harder to place wool types on offer rather than an overseas demand issue in play as most types being sought or sold forward were types not that readily available.

The selling week featured a wool sale that was moved from the usual Sydney selling centre at Yennora to the Royal Agricultural Society Sydney Easter Show. The sale saw a bale of 1PP certified wool offered of an incredibly fine fibre diameter of 11.7 microns. This bale realized an auction bid of 25,000 ac greasy per kg which was passed in but subsequently sold for 41,000ac greasy per kg to premium Italian wool buying company G.Schneider. Congratulations to both G Schneider and their client but also to the vendors of the Hillcreston/Pine Hill bale. The presence of such a fine example of the Merino breed helped make the wool sale an attraction to the public and also show sale attending wool growers, wool trade and the media.

The weeks sales across the Merino spectrum was generally quoted as being to the negative trend, but many individual wool types held their values and in some cases, some extreme gains were made. In the ultra fine sector, a few lots of traditional wool types of sub 15 micron were sold at levels around an impressive 600ac clean/kg better than the last offerings of these types. For the best top making and spinners wool in the 16 to 18 micron area, price gains ranging from 15 to 45ac clean kg were achieved, but once again volumes of these wools are extremely low and are expected to remain in short supply until the new shearing in the spring time.

In the general super fine(16.6 to 18.5mic) and fine (18.6 to 20.5mic) Merino segments, nearly all of the losses in fleece types can be attributed to wools that were high cvh (co-efficient of variation hauteur - with hauteur being the average length of fibre in top after the wool has been combed), high pobM (position of break in the middle of the staple) tests or wool sale lots containing more than 1% vm (vegetable matter). The higher the VM reading the worse the losses extended and this is due to the lack of wools testing in the 0.1 to 0.9 vm range to enable an average of 1% vm which is the standard of most Chinese manufacturers as their most top quality and highest volume of type purchased. Crossbreds and carding wools were the strongest sectors and gains of 10 to 25ac were made on these wools.

Next week is a recess and sales will recommence in the week beginning 9th April. A market testing 49,000 bales is rostered to sell.

Wool forwards report - SA Markets

The soft finish into the Easter break left both buyers and sellers unsure on the direction of the market. Although a negative week on the spot market the wash up was not as bad as some participants predicted. While some micron gave up 40 to 50 cents good quality wool of low CV and high tensile strength continued to sell well. Buyers go into the recess still looking for confirmation from the processors that recent falls have been sufficient to see demand return to the market. This lack of commitment saw bidding prices on the forward drop away as the week progressed. Some relief was delivered by a softer AUD that help prices firm by weeks end

We look forward to better bidding interest coming out after the Easter break and sellers narrowing the gap.

AUD Commentary - SA Markets

The Australian Dollar took a tumble going into the Easter break, falling to the year and this week’s low of .7651 on Thursday, after hitting a high on Tuesday of .7758. Overnight the US Dollar surged higher following better than expected U.S. GDP data for the fourth quarter of 2017. The release showed GDP grew by 2.9 percent as against earlier estimates of a 2.7 percent. Other data released showed a strong lift in pending home sales for February.

However the dominant global news is the potential trade war, and the USD rallied his week as trade-war rhetoric eased following news that the U.S. and China are willing to negotiate. Earlier Chinese Premier Li Keqiang said the U.S. and China should work to resolve trade differences, and China would strengthen intellectual property rights for U.S firms. Li's remarks came after U.S. Treasury Secretary Steven Mnuchin said he is “cautiously hopeful” a trade agreement can be reached. The USD lifted was also helped higher after President Trump tweeted that the meeting between the North Korean and the Chinese leaders “went very well” and that the former was “looking forward” to his meeting with Trump. The AUD also came under pressure from further heavy falls in Iron Ore and Coal prices, with Iron Ore falling 20.5% during March to $63/tonne. During the week Australia’s Consumer Confidence Survey release surprised with a fall to 117.4, underlying the issues the RBA faces, with very low wages growth and weak inflation numbers. There is a growing group of analysts who now say there will be no rate rise by the RBA this year.

Technically the AUD still remains contained within a very broad sideways pattern, despite the overnight fall to a fresh low for the year of .7651. A break below the strong support at this level would indicate a resumption of whole fall from 0.8135. Intraday bias has also turned negative. Previously here there was strong buying support, and possibly we may see a short term bounce. On the upside, a break above of 0.7790 resistance is needed to signal a new rally.