The AWEX EMI closed on 1990c delivering a 9c increase for the week.
The positive result produced a clearance rate of 95.3% of the 49,415 bale offering, as auction sales resumed after their three week recess.
The expectations going into the week were well below the final result. The exporters reported an absence of Chinese interest for trading over the recess, however after an opening day of selling (producing a 20-30c drop in most types) the market found a base level mid-week.
By Thursday a bullish tone was noticeable throughout the day resulting in some solid rises on the fine and superfine merino types.
Merino Fleece with the best specifications were keenly sought after, especially the low VM and high strength and yield. Weekly rises were posted up to 74c on the 18.5 MPG, however, generally the rises for 18 and finer measured between 25-55c. 19 and 19.5 were 5-10c higher and the MPG’s coarser than 20μ lost between 10-15c.
Skirtings showed promise from the market opening and by close, 40-80c had been added – especially on lots presented with their VM below 3%.
The Merino Cardings indicator posted rises of 15-30c for the week.
Crossbreds were the real casualty of the three week recess. The losses posted on the finer edge of the category were mildly alarming with the 26 MPG posting a 90c drop whilst the 28 MPG fell 53c and the 30 MPG down 35c.
The emphasis on lots meeting the Code Of Practice preparation standards was once again evident in this category and punishment severe for those who chose to neglect the basis of Australian Wool Preparation.
Forward Price Report from Michael Avery (Southern Aurora Wool): The forward markets traded thinly over the recess with the indication that the spot auction would open under pressure and this played out, with all qualities 20 to 30c opening cheaper on Tuesday but recovering by the markets’ close. The forward market showed a similar pattern.
Stabilization in the spot market saw interest along the forward curve increase with trading out to August 2019. Solid prices were received for the New Year with 19.0 peaking at 2100 cents for February and 21.0 trading above 2000 cents out to May ‘19.
Whilst forward prices are discounted to the spot market they still represent historically high hedging levels. This invert is driven by the inability of the processors to pass the current raw wool costs down the line. There will be demand destruction at current price levels but supply concerns mask any impact to date. We expect this situation to play out in the short term but the risk of the market fatiguing increases as we move forward into the new season.
Commentary: What an opening, and testament that we really don’t know what we don’t know when it comes to the current wool market fundamentals.
Our Market intelligence over the break was one that delivered little or no confidence in the opening being in touch with the closing levels however within a day of the market recommencing we see a glimmer of hope that this market has more appetite for Australian Wool than we gave it credit for.
This week’s offering of 37,290 bales should be met with some vigour as the supply of wool becomes the topic once again. This current extended wave of elevated prices is unique in my life time in wool (~40years).
The other item I wished to speak about is the drought conditionings worsening across our area of service. If anyone needs assistance in setting their management program and or feed budget to get through this tight situation, please don’t hesitate to contact me ASAP. Moses & Son have got your back!
-Marty Moses, Moses & Son, Temora