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Prices turn negative at Australian wool auction this week

Nov '19
Pic: Shutterstock
Pic: Shutterstock
After appearing to break trend last week with prices rising in a relatively large offering, hopes of a more positive market proved unfounded this week ending November 8, as Australian wool auctions produced negative results. While all the gains of the previous few weeks were not entirely eliminated, they were being steadily diminished throughout selling.

Perhaps not truly indicative of the whole Australian market, the Australian Wool Exchange (AWEX) Eastern Market Indicator (EMI) fell 39ac or 2.4 per cent to 1555ac clean/kg. The USD EMI was hit harder as the appreciating US dollar against the AUD helped push that indicator down 3.3 per cent or 36usc to close at 1068usc clean/kg. The Western Australian market is perhaps a better barometer this week, as their indicator fell just 25ac or 1.5 per cent with more than half of that drop being attributed to the foreign exchange (forex) rate changes.

"A slowing of prompt demand once again was the primary concern for exporters. The holding of any significant volume of wool remains high risk for buyers as grower stocks are higher than previous seasons," the Australian Wool Innovation (AWI) Limited said in its 'Wool Market' report for sale week 19 of the current wool marketing season.

"In what has become the status quo of the current market, as prices fell, the pass-in rates increased exponentially. Seller resistance of this nature has not been seen for quite some time, but a cursory look would see that strategy as a positive for the health of the market. The strength of competition was just not there this week to justify an unchanged market price and growers selling had a firm price set and clearly were not willing to compromise. In most cases they were unwilling to negotiate a lower return post auction and buyers had to advance to the reserve or leave," AWI's weekly report said.

The latest figures reveal that 406,875 bales have been sold through auction so far this season. At the same point in 2018-19 season, 521,939 bales or around 22 per cent more volume had been moved into the supply chain. The 2017-18 season saw 646,907 bales having being sold by week 19 which is a cumulative 37.1 per cent higher volume in just the three year period. There are just six weeks of selling left until the Christmas recess, and there is a “week 25” to close this half of the selling season. Sales will therefore resume in the New Year selling as “Week 29”.

Just short of 38,500 bales would be on offer for trade at next week's auctions. The market direction will be decided by the balance of the relatively large volume for sale versus a strong Fremantle finish to this week, the report said.

Fibre2Fashion News Desk (RKS)

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