AUSTRALIAN wool prices dipped again this week, with quality and selected wools holding their value, and some crossbreds and Merino types, and lower spec lines dragging the market back.
The benchmark AWEX Eastern Market Indicator dropped 13 cents to 1981c/kg clean, in the last series of sales before the three-week recess.
Brokers passed in 8.5 percent of the 4,544 bales offered, 3336 fewer than last week.
AWEX senior market analyst Lionel Plunkett said the EMI has now lost 75 cents over the previous two sales. The buying sentiment could best be described as cautious this week, following the significant losses experienced in the previous sale, he said.
“This cautious approach resulted in a softer tone, which was evident from the outset.
“Wool was discounted on all types and descriptions, across the entire Merino spectrum and prices generally fell by 10 to 30 cents for the week,” he said.
“Lots possessing favourable additional measurement results; however, in particular those with a Cvh of less than 42, still attracted excellent support due to their minimal availability, and recorded minimal change for the series.
“Although some selected wools held up well, overall the market still headed further into negative territory,” Mr Plunkett said.
“Worth noting; however, despite the fact that the market lost ground for the week, toward the end of the sale a positive sentiment returned, so much so, that the northern region recorded a 3 cent increase on the final selling day and the southern region posted a minimal 3-cent loss.”
Mr Plunkett said the skirtings generally dropped by 10 to 20 cents, lots with vegetable matter (VM) greater than 4pc most-affected.
“A limited offering of skirtings 19.5 micron and coarser, with less than 3pc vm managed small increases for the week.”
Mr Plunkett said the crossbred sector performed with mixed results, with 28 micron wools falling by 20 to 40 cents, 30 microns rising by 10 to 20 cents and all other microns firm to unchanged.
“A limited offering of cardings generally eased by 20 to 30 cents.” As previously mentioned, the market now enters into a three-week recess.
AWI sees an exchange rate factor in pricing
Australian Wool Innovation’s weekly market report said foreign exchange (forex) rates of the Chinese yuan or CNY versus the $US continue to be problematical for Chinese importers and manufacturer’s currency risk strategies.
“They need the RMB/CNY to buy $US in order to purchase and import wool.
“As the CNY is not a true floated currency, it is difficult to hedge properly,” AWI said.
“It appears on the surface that this rate is being used to combat or inflame the US v China attempts to balance the trade between those two countries.
“Others call it a trade war, but it appears far wider tactics are being employed other than tariffs to achieve that same balance result that the USA is looking for.”
AWI said this week the forex rate of the $US remained stable here against the $A, whilst the CNY strengthened by almost 1pc against the $A.
“The US rate almost mirrored the auction price movement as that strengthened, the local $A auction market decreased.
“Whilst the weekly comparison shows just a 0.1pc strengthening of the forex, the rates during the actual auction selling time was well over 0.74pc reflecting the 0.6pc reduction in general $A price levels.”
AWI said in the past few weeks almost 80,000 bales have been sold to the trade, alleviating to some degree the pressure on access to supply for the time being for overseas manufacturers.
“Global stocks of wool and particularly the Merino quality for apparel is still dangerously low.
“We are in midst of the quiet period in retail for wool, ie the Northern Hemisphere summer, and we will need to wait a month or two before production needs to be ramped up to supply the upcoming peak period of fall and winter, and then the pressure will be exerted once more on supply,” AWI said.
“The buyers list this week was once again dominated by Chinese indent operators in both the Merino fleece and crossbred markets, whilst processors and traders were in full force across the skirting and carding markets.”
Australian wool auction sales resume the week beginning Monday 6 August.