The opening week of sales at Australian wool auctions produced some stunning results and mostly to the positive. Despite the comparatively large offerings and some radically adverse movements in the AUD v USD through the recess in sales, prices rose steadily from the outset of selling. Demand increased as the auctions progressed, and the dearest point of the selling week was at the close. All types, apart from carding wools, were affected.

The AWEX EMI (eastern market indicator) increased by a very impressive 28 ac/clean kg for the week to 1550ac/clean kg. This is 253ac higher than last year at the same time or 19.5% better. More significantly, in USD terms, the EMI leapt forward by 47 usc to roar through the 1200usc mark to close the week at 1220usc/clean kg as the stronger AUD failed to dampen the current strong demand from mainly China. The EMI in USD is currently 22% or 220usc higher than last seasons opening sale post break.

The selling week commenced with buyers pretty much resigned to the fact that the market was going to be holding levels and perhaps just a little cheaper as new sales were covered. This was basically borne out by the results of the Tuesday auctions at Melbourne and Sydney which were firm to slightly dearer. By Wednesday though, the tone had improved significantly as re-ports of overseas users placing further orders at full market price filtered through. Buyers became somewhat spooked by such positive action, and this resulted in a 30 to 40ac dearer market on the next 2 days of selling.

The comparatively large availability of Merino fleece sold extremely well and the new seasons wools appear to be of very good quality for the moment. Strength is generally good, and the style is white and bright. The heavy vm (vegetable matter) that was evident throughout the past 12 months appears to be waning , with more FNF (less than 1% vm) clips becoming more prevalent. The most significant price escalations occurred on the super fine (less than 18.5mic) spinners and best top making sale lots exhibiting strength readings of over 35nkt. These wools were generally 70 to 120ac clean/kg dearer as several operators competed strongly with the Italian orders.

Perhaps the most surprising aspect of the opening sales was the strength of all the crossbred (26 to 30 micron) fleece on offer. This area of the market is generally the most reactive sector to forex movements and the 50ac clean kg appreciation of aud levels was totally unexpected. The competition was at intense levels, so it was perhaps inevitable such rises were registered.

Skirtings were sold under much less intensity but still managed to add 10 to 15ac clean/kg in general to their values. Buyer sup-port was strong and consistent, but prices couldn’t match the gains of their fleece counterparts. Carding types were the only disappointment of the week, and 20 to 30ac clean kg losses were recorded, with some locks types up to 60ac cheaper.

Wool sales next week in Australia will offer around 38,000 bales to the trade. With such a strong finish to this weeks selling, a very strong market next week is also highly anticipated by most participants.

AUD Commentary - SAW

The Aussie has been on the defensive all week, falling in offshore trade, trading today (friday) near the week’s low at .7858, well off Monday’s highs of .7948. Global markets were driven by geopolitical concerns this week surrounding the war of words between North Korea and the US with investors clearly getting nervous that this could potentially turn into something far more serious. On the back of that the Dow fell 200 points overnight and the VIX volatility index for US Stocks spiked by over 40%. The Aussie, as a well-know proxy for investor sentiment fell, but surprisingly moved higher against the other key commodity-bloc currencies, the CAD and the Kiwi dollar. In New Zealand this week, the Central Bank announced its key official cash rate would remain at a record low 1.75 percent, and said monetary policy will remain accommodative for a considerable period. Analysts say the fundamentals for the global expansion continue to improve, as demonstrated in last Friday’s U.S Employment numbers, which again exceeded most forecasts with the Unemployment dropping to 4.3%. Australian Commodity prices also rallied, especially in Coal and Iron Ore, with Iron Ore hitting four month highs on Thursday on the back of another surge in Chinese steel prices. According to Metal Bulletin, the spot price hit $76.68 a tonne, and in two months has lifted an extraordinary 43.7%.Today two key events could move the Aussie, the first is Reserve Bank of Australia (RBA) Governor Lowe’s testimony to the Governments House Economics Committee, the second is the release of US CPI for July at 10.30pm tonight. Technically the Aussie remains in a minor uptrend that started in June, however for the moment that rally it is capped at resistance .8050, while the market corrects lower to minor support at .7835, and then .7760.

Southern Aurora Wool forwards report

The irregular close to sales prior to recess coupled with a rising AUD and sluggish demand early in the break had most industry analysts prepared for a slow start to the new season. Better demand signals over the last 10 days and a steadying dollar saw forward markets lift to trade over 1500 in September prior to the auction commencement. The positive move in the spot auction saw forward price activity improve and new highs achieved out to June 2018. More importantly good volumes (72t) were traded in the spring months at levels (1505 to 1530) that would result in a hedge return for growers in excess of $2000 for their 21.0 fleece. Activity tailed off into Thursday as exporters and processors reasserted positions and risk profiles.