The strength of the Australian dollar (AUD) was the primary price setting factor at this week’s Australian wool auctions. Despite Australia being the only Merino supplying country offering quantity as South Africa heads into a two month break in their sales, overseas users and buyers were not keen to lift their buy in levels in their transactional currencies of US Dollars (USD) and Chinese Yuan (CNY).  As such, the AUD levels were allowed to fall by buyers to basically match the forex movements.   

The value of the AUD has shot up by over 5% in the past fortnight whilst the EMI has fallen 3% in AUD. This is effectively a net gain in export value, but not a positive for those selling locally into the auction each week. 

Demand is steady but just not as strong as usual for this time of year. The atmosphere currently at auction is more akin to what has been experienced in the August/September period over the past few years. European activity has waned leading up to their summer holidays in August, although the few spinners and best top making clips are being well sought by the big two manufacturers from Italy. The Indian enquiry remains in play and buying for that nation is visible. 

China in general is acting cautiously as most participants are monitoring the quantities available for sale and forecast up to and beyond the three week recess in sales in Mid-July to ensure supply to their machinery is met.  With just four weeks of sales left, this is front of mind.

A major conference of the CWIA (China Wool Industrial Association) has just concluded in Wuxi. The mood was reportedly good without being upbeat. Most openly renewed their commitment to the wool textile business. Common themes included innovation, upgrades to plants and transformation from traditional supply chain, the need for China to make better wool products to increase China’s domestic demand and create some profitability.

Under the current weaker demand buyers are focusing on the better quality and properly prepared wool clips. 

33,000 bales is the current volume rostered for sale next week, with just Melbourne and Sydney selling on Tuesday and Wednesday.