MORE wool growers passed in clips as auction prices fall further this week, despite many industry observers predicting a dearer market.

The Australian Wool Exchange said due to a weakening of the Australian dollar (AUD) compared to the US dollar (USD), the wool market has recorded another small overall loss for a third consecutive week.

The passed-in rate for the 38,904 bales listed (up 4444 bales) rose 1.5pc to 9.6pc.

“When the market opened, it was immediately apparent that the lower AUD was not going to have the expected impact on prices, instead losses were generally recorded, with wool 18.5 micron and finer most affected,” AWEX said.

“Across the country the Merino fleece Micron Price Guides (MPGs) movements ranged between plus two and minus 33 cents.

“The AWEX Eastern Market Indicator (EMI) dropped by 3 cents for the day, with small rises in the crossbred sector preventing a larger fall,” AWEX said.

“The second day of selling was very similar to the first.

“The Merino fleece MPG movements ranged between plus 2 and minus 21 cents.”

AWEX said the EMI fell by another 3 cents, with small general increases in the crossbred sector again preventing a larger fall.

“This 3-cent drop in the EMI was the sixth consecutive daily fall in the EMI, although no fall has been larger than 4 cents.

“The EMI dropped 6 cents for the week, closing at 1125 cents/kg clean.”

AWEX said since the close of the previous series, the AUD has dropped sharply compared to the USD, currently trading at 65.42 US cents, a fall of 1.34 cents.

“Due to this fall, when viewed in USD terms, the fall in the EMI was greater.

“The EMI fell by 19 US cents for the week, closing at 736 cents, a reduction of 2.5pc,” AWEX said.

“This was the largest weekly fall in USD terms in the EMI since January.”

European and Chinese consumer recovery remains elusive – AWI

Australian Wool Innovation trade consultant Scott Carmody said this week’s Australian wool auctions sold definitively to the buyers’ favour.

“Both the local auction price and the major foreign exchange (forex) rates available headed downward, giving a cumulative price benefit for the overseas wool users converting their local currency into AUD for wool purchases for the week.

“At times, this forex rate went over 2pc to their advantage on top of the 0.5pc reduction in the AUD EMI,” he said.

“The US Dollar (USD) is gaining strength against the AUD.

“Positive US economic data from last week is indicative of resilience in the economy,” Mr Carmody said.

“This movement supports the overarching sentiment of there being another nominal interest rate cut by the USA Federal Reserve in November.”

Mr Carmody said as the Australian dollar (AUD) value retreated, blame is being apportioned to the ongoing uncertainty ahead of US presidential election.

“Either way, this reduced AUD value certainly aided in the wool auction prices being held up this week, somewhat shielding sellers from lower levels at auction and masking the weaker demand scenario for wool traders, buyers and manufacturers.

“The current activity at auction appears to be signalling that the much-awaited for recovery in the European and Chinese domestic consumption markets remains elusive,” he said.

“The purchasing weights for the usual Euro orders seem to be way off the pace, with reduction of built up stocks at all levels beyond the greasy stage the current modus operandi.”

Mr Carmody said Chinese buying has now appeared to have largely reverted to a higher percentage of machinery demand.

“Traders to China, Chinese-based top makers and Chinese bound indent orders were evenly distributed on buyers’ lists this week.

“Buying for other destinations was very difficult to isolate or evidence in the auction rooms.”

Mr Carmody said as is often the case in weak demand sale weeks, as the wool prices in USD and CNY terms dropped over the 2pc mark on a week-to-week comparison on Wednesday, the first stage manufacturers kicked into a higher purchasing mode.

“Their buying was the most dominant towards the close of selling as the buying indents and forward contract commitments appeared to have been met for the week.”

Next week, Sydney and Fremantle will sell on Tuesday and Wednesday, while Melbourne will sell Wednesday and Thursday to accommodate a Tuesday Public Holiday. There are currently 37,991 bales rostered nationally.

Sources – AWEX, AWI.