Wk 34 23/02/2017. The AWEX EMI continued to appreciate, rising 9c at auction sales in Australia this week. The EMI now rests on 1449c, with the 5.6% passed in rate a great indicator of the strength of the market.

The Merino fleece 18-20 micron categories saw the best improvements, adding 10-20c, whilst the 16, 17 and 21 MPG’s posted 5-10c for the week. The best style and specified lots continued to achieve price premiums over the over-length, variable length, and poorly prepared lots.

Skirtings showed little change to last week’s price levels, and it’s the first time in some weeks where the skirtings have not seen bullish purchasing.

Cardings posted rises of 15-20c, with extreme prices paid for the best Merino crutchings. Washing Merino lambs attracted extreme competition and top crutching price in the Moses & Son catalogue achieved 1025c which could be the highest price I can remember for this type (1543c ACY) .

The market extended its positive tone to the crossbred sector, with up to 30c added to the 26-28 MPG’s and a welcomed break for the sector.

Next week, the offering of 42,000 bales should remain firm as we saw a slowing of the market trend on Thursday’s closing hour. Hedging opportunities remain attractive in most micron categories, however as the season progresses, the trend has been for the discounts pricing into the spring months to grow as we move into March and April.

I have had some interest in 19 and 21 micron Put Options, as well as good interest in the widely used cash settled forward contract. It would be amiss of me not to warn producers about the greed factor that may creep in as the Merino market escalates (especially the 17-19 micron). For a small investment, a forward contract can lock in extremely profitable prices for your upcoming clip. An interesting statistic reveals that over the past 4 price spikes, the EMI average falls from autumn to spring 16%. Currently hedging into spring costs about 7%. Seems like a gift to me? ~Marty Moses

Market Report (PDF)