A tough week at the Australian wool auction sales. All types and descriptions on offer sold at levels generally 20 to 40ac lower than the previous week, apart from the carding sector which was broadly unchanged but did have minor movements both plus and minus within the category. As prices lowered, passed in rates rose and concluded at 14.2% nationally, with the majority of the wool being held back within the fleece sector of both Merino and crossbred types.

The AWEX (Australian Wool Exchange) EMI (Eastern Market indica-tor) lost 25ac or 1.6% this week to close the week at 1530ac clean/kg. The USD (US dollar) EMI dropped off even further by 2.1% as the half a percent weaker AUD (Australian dollar) assisted those over-seas buyers using USD to purchase their wool. The USD EMI closed at 1035usc clean/kg.

Sale results went to pre sale expectations, as exporters reported business as slow and very competitive pricing required to execute the price levels being offered - read low price bids.

The comparatively larger volumes on offer are certainly not helping the market maintain its levels in the present trend. Demand is seemingly steady enough to support weekly volumes of around 30k to 32.5k bale sales, but above that the price struggles to even main-tain a stable level . Whenever quantity rises above this volume, price degradation has been prevalent during 70% of sale weeks but below that volume, 100% of sale weeks have produced price gains.

The South African situation post the FMD outbreak causing a ban of wool export to China is being managed, but naturally will invariably effect the global market for wool, especially the dominant Australi-an market. This has resulted in a growing shipping backlog which has led to restrictions of available vessels.

Sensibly the industry over there has declared for the greater good, sales in South Africa will cease until the second week of the New Year. Such flexibility in their selling system must be applauded and learnt from as both the brokers and buyer/exporters from South Africa stat-ed that “the extra time required before wool can be shipped will neg-atively impact auction prices as the buyers will have to finance their wool purchases for a longer period.”

Also of significance this year to all shippers to China is that the Chi-nese New Year will fall on the 25th January. Most mills in China do not wish to receive wool from around the 20th January until 3rd February at the earliest, which effectively means anything bought uncommitted by exporters pre Christmas will need to be financed for upwards of six weeks.

On top of the above, Australia sells deep into December this year (week 25) so the ability of exporters to buy wool that week and ship is severely hampered by simple logistics and the closing/opening times of those businesses, leaving the buyers/exporters to carry over any unfinished orders through the 3 week recess. Current volatility and financial conditions will be barriers for intent of traders to carry stock.

Next week has a sale volume of over 41,000 bales.

AUD Commentary - Southern Aurora (SA) Markets

By Garry Booth - The Australian Dollar traded mostly lower this week, in a choppy market as the U.S Dollar lifted against most currencies on stronger than expected growth numbers. The U.S stock market rec-orded four successive record highs, while over in the U.K better news there saw the British Pound strengthen.

Technically the AUD still remains in a broad downtrend. After open-ing at the weeks high of .6794, the Aussie eased to a low yesterday of .6759, and today (Friday) is trading at .6770. Key support is seen at .6732 while resistance is at .6812. We still believe the AUD will test new lows over the coming weeks.

Forwards Commentary—Southern Aurora (SA) Markets

By: Mike Avery – Why no value on price certainty?

The recent trend of selling inaction continued again this week. The only trades executed ended up being at levels 30 cents over the closing cash. 19.0 traded at 1780 for February and closed the week at 1743. 21.0 traded March at 1730 and closed at 1708.

During November the market traded only 81 tons. This is less than a quarter of the volume executed in November 2016, 2017 and 2018. What is more interesting is when we examine the price trends and the curve during those periods the reason for the cur-rent inaction is even more baffling.

There is no relationship to price or the position on the forward curve. Current global economic trends are less positive than they were previously. Wools price position compared to other apparel fibres does not lead to confidence nor the even changing mood of the China/ USA trade friction.

The underlying reasons for the lack of participation needs to be looked at more carefully but likely lie with the drought induced fa-tigue in the market, current volatility and supply concerns weighing on all.