AWEX wool indicator closes 1.6% lower last week (Australia)

Australian Wool Industries Secretariat Inc (AWIS) releases wool sale report for the week ending June 8. The Australian Wool Exhange (AWEX) Regional Indicators finished 1.6% lower, on average, at sales in Sydney and Melbourne this week when the US exchange rate rose by 2.4%.  The Eastern Market Indicator (EMI) moved up by 0.8% in US currency. There was no sale in the West.

There was some uncertainty about how this week’s market would open, given the turmoil in global economic markets and in global confidence since last Thursday.  It did appear that financial markets were becoming more settled by mid-week.

The market opened in a similar manner to last week, with good competition for the Free, or Nearly Free, types and easing for wools with higher levels of Vegetable Matter.  Falls were greatest at the fine end again this week, but by lesser amounts than last week. 

Falls in individual Micron Price Guides (MPGs) were confined to a few cents from 18.0 microns up in Sydney and from 19.5 microns up in Melbourne. The rise in the exchange rate meant that the Eastern Market Indicator (EMI) in US currency was up by 5¢ on Wednesday.

A 1.4% rise in the US exchange rate put some addition pressure on prices in Australian currency on Thursday.  Fine wools did better on a percentage change basis on Thursday apart from a further 28¢ fall in the 17.0 micron Micron Price Guides (MPGs) in Melbourne. Crossbred prices were down by generally small amounts.

The market has been much steadier over the last two weeks than it was over the preceding four weeks.  Pass-in rates were similar to those in Sydney and Melbourne last week.

The average Eastern Market Indicator (EMI) and WMI remain above last year’s values as the end of the season is approaching.  The average Eastern Market Indicator (EMI) is still 85¢ above the same period last year.

In other countries, the Cape Wools Indicator was down by 1.7% (-1.9% in US) since their last sale two weeks ago.   The Wool Services International fine crossbred (33 - 35 microns) and coarse crossbred (36 – 39 microns) Indicators were down by 2.5% and 5%, respectively in New Zealand.

Among other fibres, July futures for cotton were up by 6.3% for the week on Friday, to recover most of last week’s 6.8% fall.

27,601 bales were on offer, compared with 39,341 bales last week (when all three regions sold).  12.0% were passed in, comprised of 10.7% in Sydney and 12.9% in Melbourne.  Pass-in rates for Merino fleece and skirtings were 13.0% and 13.8%, respectively.  24,295 bales were cleared to the trade.

The year-to-date offering is 44,145 bales less (-2.3%) than at the end of the same week last year.  If the forecast offerings over the next three sales are achieved, the full season year-on-year change will be around -1.6%.

One can only describe the global economic events of the last week as turmoil.  Very strong negative sentiment at the end of last week was gradually replaced by improved economic confidence this week. 

This was particularly so when Ben Bernanke indicated that the United States is looking at a third period of “quantitative easing” (printing money) and China lowered interest rates by 0.25%.  These factors combined with very good April quarter economic outcomes in Australia to lift the US exchange rate by 2.4% for the week.

Skirting prices eased on both days, with the poorer types most affected.  There appeared to be more willing sellers this week, as the pass-in rate of 13.8% was well below that seen in recent weeks; and was to similar to the pass-in rate for fleece wools.

Crossbreds had another reasonable week, with the changes including some small increases in some average AWEX Micron Price Guides (MPGs).

It was a steadier week for oddments after some weeks of downward movements.

Buyers for China were dominant this week, followed by strong support from buyers for India and Taiwan.

Sales will be held in Sydney, Melbourne and Fremantle next week, when 33,926 bales are currently rostered for sale.  Present estimates for the following two sales (Weeks 51 and 52) are 24,965 and 34,000 bales, respectively; an increase of 15.9% over the three sale period when compared with last year.

In South African sales, the Cape Wools Indicator was down by 1.7% since last sale against a 0.3% depreciation of the Rand against the US Dollar and a 1.0% appreciation against the Euro.  12,424 bales were on offer. South African sales are now in recess until 15 August.