Week 06 – August 2022

The opening week of the “new season” Australian wool auctions was all about currency and volumes. The pent-up supply due to the three week recess was seen as a impediment to positive market outcomes, but far more relevant to wool pricing was the vastly improved and more expensive Australian dollar (AUD) compared to the US dollar (USD) and Chinese renminbi (CNY).

These two forex rates – when paired against the AUD – were almost 5% stronger than the closing basis of the last auction sales held in mid July. So whilst it may seem strange, by falling by 3.2% this week the market actually outperformed against expectations. A far worse result could have resulted – and was forecast by many – given the reality that wool is predominantly traded in these foreign denominations converted to AUD for local auction purchasing.

There were large offerings available this week, but this was to be expected and is quite normal for the first sale back from the annual winter recess. What was of some concern for buyers and exporters on the supply side though was the fact that August is typically a difficult trading and buying month and the first three weeks this season had forecast an offering of just short of 150,000 bales compared to the 110,000 bales of last year.

Similar negative AUD price outcomes occurred this time last year when the market lost 56ac/clean/kg (-46ac this week). However, the market differed this year by having USD values hold up and in fact improve (+11usc) whereas last year saw USD values drop 55usc. Additionally, this year had a relatively strong clearance rate of 77.9% compared to just 66.8% sold to the trade last year, so some strong demand pointers emerged from the adverse ac prices paid this week.

Merino fleece, skirtings and cardings all registered depreciating values of a general 40 to 60ac/clean kg by week’s end. The largest Chinese top-maker, Australia’s leading local manufacturer and the local traders dominated buying.  Crossbred wool types were 10ac cheaper at the finer end, but quotes had the broader (30micron) types 15ac dearer, which was the only type to post a gain. Europe’s largest processor dominated this sector with solid support from all other market sectors and destinations.

Next week sees just short of 50,000 bales to be offered.

AWEX rebased market indicators so most price movements are now not in direct line with past records kept.