Week 11: 14/09/2017 The AWEX EMI closed the week on 1525c down 31c at auction sales in Australia this week. The superfine fleece categories were the hardest hit early in the sale week, with losses extending the entire merino MPG range.
Thursday’s market experienced some consolidation and in some MPG’s a meagre recovery. Skirtings were a mirror of their fleece counterparts on Wednesday and gained better support on Thursday, however the lots containing heavier VM had some huge gaps in the support levels. Whilst the Crossbreds offering followed the weekly trend to the tee, it was the carding market that bucked the trend, posting a solid result for the week and all centres increased the MC by 2-5c.
Accordingly the pass-in rate escalated to 15.5% almost double the season to date average. Next week the market has catalogued 43,077 bales, which should be met with renewed vigour if my Market Intelligence sources are reliable. Mike Avery from SAW reports “The confirmation the market did not eventuate and the auction market corrected downward accordingly. Futures traded in light volume but at historically attractive prices, especially with the aid of hindsight. All trades fell between the 90 and 95 percentile bands including the June 2018 trade.
Despite the strong market conditions over the past 2 months there were a number of negative factors at play this week that orchestrated the week end result. Currency exchange has been niggling at the traders for a few weeks now as the AUD exchange rate straddles 80usc up 4c (5.2%) in the past 8 weeks.
Secondly the market supply profile has been made up of a number of new challenges, the first is an increase of the number of fleece bales with VM content over 1%, and to add to the selection woes this week we also saw an increase in staple mid-point breaks, which is a negative factor in orders destined for China. However from speaking to a number of exporters today the single biggest issue reported has been the Chinese apprehension to commit to orders before the Nanjing Wool Conference being held over the weekend. The Nanjing conference is heralded as potentially the single most important event on the wool calendar in influencing the future direction of the market. There is a strong view from many market participants that some Chinese participants may have been sitting out of the market in front of the conference. The other factor exporters have mentioned is the increased financing requirements for the new market price level, especially when the YOY offerings are up by 10%. All eyes will be on China this weekend with the Nanjing Wool Conference and ideally we will see positive demand signals reflected in the market prices paid next week. ~Marty Moses