Australian wool auctions produced a radical change in sentiment this week and thankfully for the better. Massive buyer support from Australia’s largest trading house competed heavily against robust Chinese indent purchasing. The result was the chaos of last week has been halted for the time being. All this positivity came in the face of a much stronger Australian dollar (AUD) versus the US Dollar which would normally send the local market plummeting further.

The Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) clawed upwards this week by just 4ac or 0.3% to 1442ac clean/kg.  As with last week’s substantial falls, the USD EMI ascension this sale series more accurately reflects the demand scenario. The USD EMI shot up by  6.8% or 54usc to a closing level of 855usc clean/kg.  Bearing in mind the AUD strengthened significantly by 6.5% this was a huge result given the precarious global situation. 

Advice has been received from textile leaders in China that states China is now “almost back to full gear operation throughout the nation except in Hubei “ province, the capital of which is Wuhan. “Needless to say, the economy has been hurt and the industry has been wounded “. 

Confirmation was also received this week that the wool auction markets in South Africa has been suspended for 21 days. New Zealand has apparently gone down this route as well. IWTO has announced the cancellation of their annual congress which was originally slated in for Tongxiang, China, thence moved to Brussels and now on moved online for their core meetings. 

The largest Australian trading house exporter dominated buying lists this week. By week’s end this company had secured around 7,500 bales at auction across the entire type spectrum and ended up topping buying lists in three of the four wool type sectors. This single entity spend represents an estimated $12 to $14-million dollar raw wool value wool of the $55 million the industry put back into the growers hand’s this week. 

Additionally, pugnacious auction competition emanated from China directly. Indents flowing from the Chinese mills helped to plug the holes of a market sinking in price falls last week. European and other non-Chinese interest was again sporadic and restricted at best. News this week confirmed the closure of all the wool mills and top making facilities in Italy, but this is far from being their priority concern at the moment in that country.

Merino fleece and skirtings finer than 19 micron were the most sought after types this week. Prices for that sector gained 20 to 40ac generally with the better specified sale lots seeing the best of buyer demand. The better yields were a crucial part of better pricing. The broader than 19micron types fell away by 25ac as the currency ascension put pressure on those commodity types. Similarly, the crossbred types drifted 10ac, as did cardings.  

Passed in rates lowered this week to 14.3% but were still at levels significantly above the historical average. Merino fleece producers were more willing sellers, but it was the crossbred wools that were mainly withheld by grower sellers from sale. Auction figures for the season reveal that the current season has seen 957,726 bales sold to the trade which is in stark contrast to the 1,162,631 bales sold at the same time last year. This means 17.6% less moved through the pipeline.

Next week has around 46,000 bales scheduled for auction. All selling centres have been moved forward to sell on Tuesday and Wednesday and all three centres are only two day operations.

Australian Government Media Release-excerpt

The Hon. David Littleproud MP

Minister for Agriculture, Drought and Emergency Management Deputy Leader of the Nationals

Friday 27th March 2020

Agriculture saleyards and auctions can continue.

The Minister for Agriculture and Emergency Management, David Littleproud confirmed today that livestock saleyards and wool auctions are able to continue. “These are an essential part of the broader agriculture supply chain,” Minister Littleproud said. “They are different to real estate auctions because of their importance to the nation.

“The Government is working tirelessly to safeguard the supply chain from the farm to the market.  Agriculture and food security are critical to Australia at the best of times. They are even more so during this the COVID-19 crisis”

AUD Commentary—excerpt from SA Markets  

By Garry Booth

In a rare moment of unity Global Government's and Central Banks acted in unison this week to ensure that Financial markets had the liquidity and the confidence to operate as near normal as possible. On Thursday, the Group of 20 major economies pledged to inject $5 trillion in new fiscal spending into the global economy. 

Share markets around the world rallied in response, with the Dow up 21% since Monday, while the S&P 500 index has now recorded its biggest three-day percentage gain since 1933. The Chinese share market rallied to a one-week high. The AUD lifted off Monday’s low of .5702 and rallying 384 points to Thursdays high of .6086, before easing into today (Friday) at .6040, from a heavy USD sell-off.

Technically the AUD is oversold and rebounding from the dramatic sell off that saw it hit .5506. Its possible the rally could extend to .6320, after breaking back through .6010, however it has not broken out of the new downtrend. We still expect the AUD to trade lower over the coming weeks, re-testing support at .5840 and then .5506.

Forwards Commentary—SA Markets  

By Mike Avery

“There is a crack in everything. That is how the light gets in.”- Leonard Cohen

There was some light shining on the spot market with most qualities showing modest gains in the spot auction this week. The forward market recorded it’s highest weekly volume for the year with growers opting for some certainty in these uncertain times. Buyers were predominantly large offshore processors. A total of 96ton was executed.

The majority of trades went through in the spring. 19.0 micron traded off their earlier highs above 1600 cents to finish the week trading at 1500 September through to December as sellers outnumbered the buyers. This is around a 10% discount to cash but still in the 65th percentile of prices for the last decade. The nearby window traded lightly under the shadow of the ever changing covid-19 restrictions. April and May traded around cash with 19.0 trading 1640 to 1650 and 21.0 micron to a high of 1635.

Auctions appear to continuing on schedule, at least in the short term, due to the diligence, proactive and cooperative work across the supply chain. There appears to be real interest from processors to get some cover in new season at reasonable levels, given the uncertainty it would be prudent for growers to initiate some hedging for spring – even if it is considered disaster insurance.