Astonishing results arose from this week’s wool auction sales across Australia. In perhaps one of the more stunning weeks of selling, all wool types and descriptions, apart from cardings, rose by margins ranging from around 4% for the higher priced wools to a staggering 17% on the broadest wools of the long suffering crossbred sector. The charge came solely from China, with a few of the larger users looking to fill their wool production pipelines.

Following last week’s impressive commencement to the new selling season, the AWEX EMI (eastern market indicator) forged into record territory, with consecutive days of breaking the highest levels ever seen. By the weeks close the EMI settled at 1614ac clean kg which is 316ac or almost 25% higher than at the same period of last season. The week produced a gain of 64ac clean/kg or a 4.1% addition to local wool values within just seven days.

When quoting the EMI in USD, the figures are even more startling, with a 28% or 280usc clean/kg advance in prices in 12 months. The EMI in USD finished the action this week 5% higher at 1281usc clean/kg or an increase of 61usc.

Following some very large forward orders being required by some larger Chinese mills, all exporters were ready to pay more from the outset. The extent and swiftness of the price gains caught the majority by surprise. Several mills were looking to get set at the end of last week and pre auction this week for delivery months 2 to 3 months out. This represented to local exporters and buyers a major shift in operational methods from “hand to mouth” to forward buying. For the past few years, the larger Chinese users have been reticent to book too much into the future, and no doubt this may well prove to be astute and opportune change of direction as the USD v AUD looks to be also strengthening against expectations of just a month or 2 earlier.

The Merino fleece and skirting segments of the market sold consistently dearer across all three centres. All wools traded in the 60 to 90ac dearer range and generally shadowed moves of each micron and type category. In fact the quotations and micron price guides out of each individual centre are remarkably and unusually well aligned in values. One exception, and the standout of selling this week, were those few bales of Merino types finer than 16.5 micron which were upwards of 150 to 180ac dearer. Similarly the small offering of super fine (16.6 to 18.5mic) spinners and best top making sale lots exhibiting strength readings of over 35nkt sold up to 140ac dearer, making these wools around 250ac dearer in just 2 weeks.

Perhaps the most stunning gains, particularly in percentage terms was the entire crossbred (26 to 32 micron) market. All types rose by up to 70ac clean kg and at the broadest end, this gain represented an increase of around 17% in just a week. Carding types continue to chart in their own territory and were the only disappointment of the week by trading generally at firm unchanged levels of price.

Auction sales next week in Australia offer a similar quantity to this week of around 37,000 bales. With prices at such giddy heights it makes it relatively easy for growers to decide whether to hold or sell, but who knows, prices may get even better???

AUD Commentary - SAW

It was an extraordinary week for the Aussie Dollar, opening on Monday at .7918, then on Wednesday plunging to .7814, before exploding higher on Thursday to .7962. The trigger to this was the release on Wednesday night of the U.S Federal Reserve Minutes from its July meeting showing that officials were now worried about the low inflation numbers, which divided members over the timing of a future interest rate hike. The minutes showed that senior officials saw a greater likelihood that “inflation might remain below 2% for longer than they currently expected" and risks to the inflation outlook could be tilted to the downside.

On Thursday also the Australian Bureau of Statistics (ABS) employment data was better than expected with 27,900 new jobs created. The national unemployment rate fell to 5.6%. Combined, total employment over the year rose by 239,300. Of that, 189,000 came in over the past five months, marking the strongest period of hiring since January 2005.

Also on Thursday there was an extraordinary rally in key Chinese Commodity Futures markets, as Vivek Dhar, mining and energy commodities analyst at the Commonwealth Bank, said the combination of US dollar weakness, supply disruptions sent “Base met-al prices mostly surging , with Coal up 6% just on the day. Iron Ore and Copper also rose more than 5%.

Southern Aurora Wool forwards report

The week opened with renewed interest from the bid side with offer sweep across the board ahead of the auction opening. This momentum was maintained into Thursday with growers receiving some historically high hedge levels as the physical auction reached highs rarely seen as we head into spring. Buyers paid up to 1900 for 19.0 microns and 1580 for 21 micron in the early spring. As grower volumes dried up in the nearby months exporters searched for value in the new year. The new year trades were highlighted by 1800 for 19.0 in January and 1510 for 21.0 in February. Trades pushed out into the the 2018/19 season with 19.0 executed in August at 1705 and 1660 for March 2019. These represent the 90 and 85 percentile of prices respectively. October options traded at 30 cents for a 1580 strike on 21.0 Microns.