A STRENGTHENING Australian dollar against the American currency has been blamed for a big drop in wool prices at auctions this week.

The Australian Wool Exchange said the wool market has continued to trend lower, recording its sixth consecutive loss this week.

Brokers reacted by passing 23.2 percent of the bales offered in Melbourne, Sydney and Fremantle this week.

Australian Wool Innovation trade consultant Scott Carmody said the strength of the Australian dollar was the primary price-setting factor at the auctions.

AWEX said with the western region returning to the selling program, the national offering climbed to 39,766 bales.

“After this week there is only two more sales remaining in the current season, and the total amount offered continues to be just above that of the previous season.

“There have been 1,804,810 bales offered so far this season, 16,000 more bales than the last.”

AWEX said the largest losses were felt on the first day.

“From the opening lot, it was apparent that buyer sentiment was weak and the prices on offer were well below those of the previous series.

“Prices opened lower, then slowly but continually reduced as the day progressed. By the end of the first day the Individual Micron Price Guides (MPGs) for merino fleece had fallen by between 19 and 90 cents.”

In the east, AWEX said the skirting markets generally fell by between 15 and 30 cents, while the other sectors recorded minimal change.

“The result was a 21-cent reduction in the AWEX Eastern Market Indicator (EMI).

“The second day further losses were recorded as the market was unable to find a firm level,” AWEX said.

“The Merino fleece MPGs dropped by between another 3 and 64 cents, except for a few scattered MPGs which remained unchanged.

“The EMI lost another 13 cents for the day, minimal movements in the other sectors preventing a larger fall,” AWEX said.

“The EMI dropped by a total of 34 cents for the series, closing at 1174 cents/kg clean.

“The EMI is now 293 cents lower than at the same time last year, a 20 percent reduction.”

Demand steady, but not as strong as usual – AWI

Mr Carmody said 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 5pc in the past fortnight whilst the EMI has fallen 3pc in AUD,” he said.

“This is effectively a net gain in export value, but not a positive for those selling locally into the auction each week.”

Mr Carmody said 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,” he said.

“The Indian enquiry remains in play and buying for that nation is visible.”

Mr Carmody said 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.”

He said 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,” he said.

“Common themes included innovation, upgrades to plants and transformation from traditional supply chain, and 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.”

There will be no auction in Fremantle next week, reducing next week’s national quantity. Currently, there are expected to be 33,463 bales on offer in Sydney and Melbourne.