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Australian wool prices adjust heavily downwards

28 Aug '17
3 min read

In complete contrast to the impressive gains of the previous week, Australian wool auction sales adjusted heavily downwards last week ending August 24. By the close of selling, the AWEX eastern market indicator (EMI) settled at 1572ac clean/kg, eliminating 42ac from the record level set in the previous week. The EMI in USD fell similarly by 40usc clean/kg.
 
Following two weeks of consecutive rises and seeing the EMI go into record territory, the market finally hit a price point where the price hurt the prompt demand, and the market reacted accordingly. And over 18% per cent of the Melbourne merino fleece and 12 per cent of the Sydney merino fleece failed to reach growers expectations.
 
“Given the prices being offered were just off a record high level, this was a paradoxical figure to most exporter buyers, but perhaps it was more to do with the speed of the market adjustment rather the actual price level that caused such high passed in rates,” the Australian Wool Innovation said in its ‘Wool Market’ weekly report for sales week 8 of the current season. 
 
The large orders emanating out of China in the previous week, seemingly dried up almost immediately at the start of last week. Buyers approached the sales with extreme caution, and as soon as weakness became the trend, most buyers retreated steadily to levels that were more reflective of where the buying demand has appeared the previous week. Those locally based exporters that had written forward orders also withdrew, and bought sparingly, waiting to achieve price levels that were more representative of where they had sold. 
 
Merino qualities broader than 19 micron sold 60ac lower whilst the average and good top making types finer than 18.5 micron were sold to levels 30 to 40ac cheaper. Significantly though, very strong buying from Italy ensured a different market direction on the spinners and best top making sale lots. Very few bales were allowed to go to their competition and this led to a slight escalation in prices, bucking the trend of all other wool sectors. 
 
Merino skirtings sold similarly to their fleece counterparts, with only the better pieces and broken types with less than 3 per cent vegetable matter (vm) holding onto their established prices. 
The strong rally that gratefully appeared on the crossbred segment of the wool auction was seemingly short lived, as all of these crossbred qualities (26 to 30 micron) sold cheaper to varying margins of between 5 and 25ac clean/kg. 
 
Carding types continued to soften as the largest buyers of these types were giving off weak signals of strength. Most traders were quoting cardings at levels which were 10 to 20ac cheaper by the close of selling for the week. 
 
At this week’s auction in Australia, around 45,000 bales are on offer. (RKS)

Fibre2Fashion News Desk – India

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