After a lack lustre series of wool auction sales last week, this week saw the complete reverse. Australian wool auctions produced action aplenty from the outset and all to the positive. The main impetus centred on Merino wool with the fleece sector the most sought after as overseas users placed orders to renew the rather empty greasy wool pipeline in front of machinery globally.

China was again dominant in the demand stakes and seemed intent on getting set for quantity, somewhat irrespective of price as supply fears around the availability of the quality wool required grows. Meanwhile the foreign exchange rates of the AUD versus the USD is at it’s lowest level since the middle of June 2017.

As a result of the extreme competition this week, the AWEX (Australian Wool Exchange) EMI (Eastern Market Indicator) lifted substantially to end the week at both the daily and week-ending all time highest level of 1891ac/clean kg. This represented a weekly rise of 55ac/clean kg or a 3% gain for the week in overall wool values. We are now 23% dearer than last year.

The EMI gain when expressed in USD (US Dollars) was somewhat diluted compared to the local AUD price rises as the forex (foreign exchange) rates fell nearly 1% for the week. This helped those buying wool in USD negate some of the price hike. As most of the Chinese buying activity is conducted using US dollars, this falling value of the AUD only helps sellers here in Australia as the rate heads towards the .7000 mark more each day.

Last month’s April AWTA data showed that volumes being produced across Australia is at least matching that of last season, despite the harsh conditions of this growing season. At these good sheep meat, lamb and wool price levels, wool producers are intent on keeping their numbers of sheep as high as possible and are presently dedicated to feeding daily to ensure the core breeding flock is kept intact.

Posing somewhat of a risk to this strategy is the rising prices of hay and feed grain and the inevitable high costs of carting water once the dams completely dry up. Heading into winter, even if good rain events do occur, the soil temperature will inevitably fall below what is required to promote pasture growth, and indeed in many areas frosts have hit already and snow falls across the North of Victoria and South of NSW the past few days.

In all selling centres this week, buyers attacked with vigour the better wools on offer and subsequent gains on all those types of 60 to 100ac were recorded. Of most interest was the 19 to 22 micron descriptions showing good yields and being less than 1% in vegetable matter (vm) content. Not all of the offered wools sold to dearer levels, as a small amount of low yielding heavier vm (3% plus) wools finer than 18.5 micron sold to a very dull tone. Similar gains on the Merino skirting types were posted. The carding market was more measured in their ascension, but still gained 25ac. Crossbreds sold to a fully firm market throughout.

Next week a very similar volume of around 38,000 bales are set to sell. The IWTO conference in Hong Kong may provide a distraction for some, but all eyes will no doubt remain focussed on the market.

Wool forwards report - Southern Aurora Markets

The auction market triggered better volumes in the forward with trades through to June 2019. Modest volumes traded in the front months as growers were keener to take advantage of record levels offered in the spring. The spike in the spot market delivered strong prices with August and September trading to 2010 on 19.0 micron and 1880 for 21.0 micron. With dry conditions still prevailing over most of the country, guaranteeing premium levels Into the new year seemed to be the focus for some growers. January 2019 traded at 1800 for 21.0 micron. This represented a premium over the then record level average of 1785 for January this year and well in excess of the auction averages for this decade

2010 January price average for 21 micron - 975
2011 January price average for 21 micron -1115
2012 January price average for 21 micron -1318
2013 January price average for 21 micron -1222
2014 January price average for 21 micron -1254
2015 January price average for 21 micron -1148
2016 January price average for 21 micron -1388
2017 January price average for 21 micron -1463

Hopefully we will see the trend continue into next week allowing growers to achieve price certainty over the coming seasons production.