Australian Wool Innovation Limited : Wool market review - week ending 17 January 2014 (Week 29)

January 17, 2014 at 02:08 pm IST

MarketScreener.com By

Sale Week 29: Fri 17th Jan 2014

OFFERING
Bales offered	53,763
Passed-In (%)	15.7%
Re-offer (%)	3.5%

AWI COMMENTARY

Prevailing expectations at the start of Australian wool auctions this week were overwhelming negative. The sched- uled volume of 60,000 bales and the AU:US exchange rate over 90cents had the local exporters and overseas buyers spooked, and cautious buying strategies would obviously be employed initially. The later non-appearance of 10% of the bales and the dollar falling to 88cents eventually helped arrest the slide in prices. Unfortunately this data wasn't available to buyers until Thursday, when approximately 65% of the volume had already been offered and put through the auction.
Local buyers and overseas customers are also continually having to reassess and find consumers for the shifting composition of wools being produced, particularly in the Merino sector. The continuing drought across most growing re- gions is playing havoc with the micron, with a significant reduction in the available types broader than 20 micron and a large increase in wools finer than 19 micron. As such, buyers and traders have become very wary and reluctant to create
an open position on broader Merino types, and are likely to be more exposed on the finer types. Given the larger volume of the finer micron descriptions this can often lead to price discounting to obtain a less risky sale.
The Superfine Merino sector (18.5micron and finer) generally followed the overall market and most average types weakened by up to 30acents clean/kg by the close of selling. Conversely, the performances of the best top making and spinners lots of good strength defied the trend and were stronger throughout the week, fetching premiums above the micron indicator of up to 100acents/kg. Despite a reasonably large offering of these better types, Italian orders were strong. Competition was also assisted greatly by top makers looking to ensure quality and some orders emanating from India. Sub 15.5 micron sale lots performed exceptionally compared to recent months, quite often selling at prices
200acents/kg higher than the pre-Christmas period, although only a few bales were seen.
Fine and medium Merino types 18.6 to 23.0 micron closed generally 30acents/kg lower, which was a reasonably good result given most prices were 40 to 50acents/kg lower at one point during the selling week. A strong rally on Thurs- day recovered 20acents/kg across all buying centres, as the market strengthened on the back of a weaker AU dollar and more intensity from some buyers whom had probably been sitting out looking for more advantageous buy in price.
Another large selection of comeback and crossbred types of 24 to 32 micron performed well, with prices just slightly weaker than the established quotations. Of exception was the 25 to 26 micron which in Melbourne drifted
30acents clean/kg lower for the week. Meanwhile, the carding sector of all breeds and microns lost all of the ground
made last week, recording losses of 10 to 20acents on most types.
The next few weeks will see reduced volumes in the market. Similar to last week, much stronger competition was witnessed on Thursday; it is an indicator that demand is relatively strong. We should see a stabilizing effect upon the market given that the quantity offered to the trade is managed carefully by sellers and the Aussie dollar continues to weaken. The upcoming Chinese New Year week long holiday may be a dampener, but business from other buying na- tions seems to be strong enough this year to somewhat alleviate those usual concerns.

Sale week	2013/14 forecast	2012/13 actual
Week 30	47,612 bales	52,461 bales
Week 31	45,458 bales	39,993 bales
Week 32	49,100 bales	53,518 bales

ICAP Wool Forwards
China Wool Type	54p (18.5 µm)	55 (21.0 µm)	T424 (28.8 µm)
China Wool Type	Low	High	Low	High	Low	High
Feb-14	-	-	-	-	658	658
Apr-14	-	-	1255	1255	-	-
May-14	-	-	1253	1253	-	-

COMMENTARY FROM ICAP

ICAP saw business in February for China wool type

55 (21.0 micron) at AU$12.40 a few times this week, this was while the auction was trading at around AU$12.25. ICAP forward prices generally tend to trade higher than auction.

ICAP saw early selling in the week with large auction volumes, but it seemed to find a base as the currency found a base.

Cotton markets have rallied strongly in the last day and maybe we will see wool to continue in the same direction.