AUSTRALIA’S wool price benchmark, the AWEX Eastern Market Indicator, held relatively firm this week to drop one cent to 1208c/kg clean.
Australian Wool Innoavtion trade consultant Scott Caremody said some positive movements were seen early this week at the Australian wool auctions, but a substantial movement mid-week in the value of the Australian dollar (AUD) soon stopped that trend.
“With quantities in Western Australia not hitting enough critical mass to hold a viable auction sale, this week saw just the two eastern selling centres operating.
“As such, quantities available at auction were reduced and assisted clearance rates to 87 percent,” he said.
Mr Carmody said exporters had reported good, (volume, not price) business being done pre-sale with China and India and even a smattering of European interest.
“These forward contracts were written though when the AUD against the US dollar (USD) stood around the 0.65 mark.
“So, when the surge in the AUD came, all impetus was stalled as overseas users and local buyers re-assessed both their open positions and purchasing strategies,” he said.
He said some strong price gains of between 5-15 cents were made within the Merino fleece sector at the commencement of sales and lasted throughout the first day of auctions, despite the AUD rising to over US66 cents pre-sale.
“Traders were keen to cover off risk on the uncovered portion of their business, so a small rise was probably no deterrent to maintaining their strategy to shorten their risk (short positions).
“This intent led to the top five buyers on the first day being mainly the export trading dominant companies,” he said.
“The Chinese first stage manufacturers, who had headed buying lists the previous few sales, seemed intent on sticking to those buy in levels of last week’s closing basis.
“These operators only had to wait out the first day before the market retreated back to somewhere near those levels on the second day of sales,” Mr Carmody said.
“Towards the end of selling for the week, their purchasing rates increased as they took advantage of the currency induced lower AUD levels available and they soaked up the bales that became excess to traders current needs at the back half of the sale.”
About 45,000 bales are currently rostered for sale next week, with all three selling centres in operation. These auctions will be held on Wednesday and Thursday only with an Australian national holiday being held on Monday.
Source – AWI.