Supply low, AUD strong & market positive

The market opened with a positive result on Tuesday as Sydney played catch-up to the strong finish of last weeks market, while Melbourne was quoted as ‘firm’.

This trend continued to the close on Wednesday with solid competition and a good clearance rate despite the headwind of a surging AUD.

The Eastern Market Indicator (EMI) lifted another 15¢ or 1% this week to close at 1,183¢. The Australian dollar was quite strong up 3 cents to US$0.694, which elevated the EMI in USD terms by 44¢ to 821¢. This caused a 5.3% lift in US$ terms. With Fremantle not selling, the Western Market Indicator remained at 1,239¢.

Turnover this week tipped below $20 mill for the first time in memory to $19.62 million as a result of the smaller offering. This moved the average bale value to $1,368 per bale, a lift of $80 per bale, taking the season to date value to $1,897 million.

With the solid market, the pass-in rate was lower at 6.8%, 1.1% below last weeks level. This resulted in 14,337 bales clearing, 3,000 fewer than last week.

AWTA volumes fell heavily in May (down 28.5% in farm bales). The season to May, volumes are down a milder 8.7%.

This week on Mecardo, Andrew Woods looked at the relationship of AWTA test volumes compared to Auction sales in order to get a view on the build-up of grower stocks (view here).

Auction sales for the season are well below the standard 85% of AWTA volumes, tracking at 72% of AWTA volumes in 2019-2020. This implies that farmer stocks have increased by around 13% of annual production in 2019-2020. Given the fall in demand, this outcome is not surprising.

While Sydney played catchup on last weeks closing sale day, the market was fully firm, an impressive result given the rampaging AUD. Less than 2,000 bales of Crossbred wool came forward and met solid demand, with 26 – 28 MPG indicators posting 12 – 41¢ gains.

Cardings joined in the spirit and posted on average a 24¢ lift across the two centres.

The week ahead

Next week’s national offering increases to 24,140 bales with Fremantle joining in with a 4,800 bale offering. Sydney & Melbourne will sell on Wednesday & Thursday while Fremantle will offer on Wednesday only.

The increased demand this week despite a higher Au$ should support the market next week.