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Wool prices jump back as extra bales and a rising Australian dollar spook buyers

Sheep Central, April 15, 2016

Wool sales Landmark1 MelbourneWOOL prices fell back this week, losing most of last week’s gains, including drops of up to 60 cents a kg clean for some Merino types.

After it was rumoured an extra 11,000 bales would be offered nationally next week and with the $A-US exchange rate rising, buyers reacted to pull the AWEX Eastern Market Indicator down 29 cents to 1241c/kg clean.

AWEX quoted the EMI in US terms as down US18 cents to 951c/kg clean. Brokers passed in 16.9 percent of the 43,043 bales offered.

AWEX senior market analyst Lionel Plunkett said after making encouraging rises last week there was a sharp reversal this week.

“From the opening few lots, the market was noticeably softer on the back of a strong Australian dollar which continued to firm over the day.

“Early on Wednesday afternoon the currency punched through the US77 cent level, coinciding with a further deterioration in wool prices which closed as much as 30 cents lower on the day.”

He said the trend continued on Thursday with an opening that was 20 to 30 cents cheaper. Prospects improved over the day as buyers became increasingly interested at the discounted levels.

“Many types were still in negative territory at the close.

“However, the losses were generally restricted to between 5 and 15 cents.”

Mr Plunkett said at the finer edge, some positive signs emerged with the better types finding good support despite a slight reduction in lesser types of the same micron.

“The outcome at the end of the week was an almost complete reversal of the strong rises during the previous series.

“At 1241 cents the AWEX-EMI is only 2 cents higher than pre-Easter levels.”

Merino skirtings were less affected by the weaker market and prices eased gradually each day, closing around 20 cents lower for the sale and about half the amount of their fleece counterparts.

“Likewise, crossbreds were only marginally lower for some microns, but fell 30 cents in other areas in what was an irregular outing.

“Merino cardings closed out the ‘Room 2” with an easing of 15 cents, although a strong finish in Fremantle late on Thursday hinted at renewed buyer eagerness,” Mr Plunkett said.

Australian Wool Innovation’s weekly market review said the long wool segment gave up the most ground this week with the Merino fleece sector retreating by up to 60c/kg clean.

“Both buyers and sellers approached the selling week in anticipation of the market coming off the highs created over the past three weeks, but the extent and speed of the pull-back caught many by surprise.

Next week’s bigger roster spooks market

AWI said although the $A-US exchange rate was a disadvantage, it was the rumour, then the release of a roster for next week selling showing 29 percent more wool available for sale that spooked the market into the downward spiral.

“An extra 11,000 bales than advised just five days earlier had been placed into week 43 auctions Australia-wide.

AWI said low greasy wool stocks, in addition to the dwindling stock levels of wool tops in the pipeline globally, remain as potentially the primary driver for the future prospects of the wool price.

“This should signal a movement towards the positive direction rather than the negativity we witnessed this week.

“Local seller decisions of this and next week have allowed buyers the opportunity of cheaper buy-in levels, but once this current surge in additional and unexpected supply is over, prices should show more stability given demand and foreign exchange remains stable,” AWI said.

The AWI review said next week’s large offering of more than 49,000 bales is widely reported as likely to be tough.

“But the sharply lower price levels and reported upcoming supply shortages may see the market turn more favourably sooner rather than later.

“Medium to longer term prospects for wool do remain firmly towards the positive.”

Sources: AWEX, AWI.

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