WEEKLY MARKET REPORT

Week Ending 11^th March, 2016

AWEX Northern Micron Indices Comparison

 CURRENCY SMASHES MARKET!

Another tough week for the market as a higher exchange rate meant only one thing - a cheaper market. Despite an identical national catalogue to the previous sale (39,000 bales) the smaller offering was of no help - the market had its biggest weekly fall in 6 months. The benchmark AWEX EMI tumbled 35 cents to 1223, a level not seen since late October. In $US terms the market fell by a modest 3 cents, this due to the rising currency. The falls were consistent across all the micron categories, 30 to 45 cents. Buyers still favoured the better types with the “right specs” - these not losing the amounts (20 to 30 cents) the lower spec types did as these copped the brunt of the falls, up to 60 cents cheaper.

Skirtings kept pace with the falls in the fleece room as most types and descriptions gave up 40 to 50 cents. Some better lots in the 18 to 19 micron range <5% VM may have escaped the worst of the carnage, back by 20 cents. Crossbreds, which can suffer the most from shifts in the exchange rate, seemed to be the least affected sector as finer microns <28 only lost around 5 cents while the broader types >30 fell by 10 to 20 cents. Cardings didn’t escape the carnage either. All types and descriptions fell by 15 to 30 cents as all 3 regional MCIs are below 1100 cents.

Certainly the toughest sale for some time as the $A rush to 75 cents put paid to any idea that the market may settle (the $A now at its highest level since July 2015).  The rate of the $A rise to 75 cents looks to have caught everyone by surprise, a 4 cent lift in 3 weeks as the EMI has given up 62 cents over the same period. The strengthening of currencies across the globe can be attributed mainly to the rebound in commodity prices over the past month and better economic growth in the US coupled with strong employment data there, Australia’s strong GDP data, an interest rate cut in New Zealand and China’s better than expected growth predicted for this year. The continuing upward correction in the iron ore and oil prices could indicate that the worst is over for these 2 benchmark commodities - iron ore at $US60/tonne and oil now above $US41/barrel. This may well indicate global economic growth could be on the way up rather than stagnant, at best, but could see even more strengthening of currencies against the $US, something we don’t want.

The 3% fall is indeed disappointing but some confidence can be gained for the longer term market prospects. The resilience of the market in $US terms indicates that demand is relatively stable and the spot market is reacting to the severe swings in the foreign ex markets. Stocks of greasy wool in the pipeline are being reported as very low and the upcoming supply at auction is expected to be shy of what the market will require. If currency rates stabilise we should see renewed interest and a slowly improving price level. Next week’s sale will be the last at Yennora for 3 weeks as the sales before Easter will be at the Royal Easter Show and after Easter in conjunction with the IWTO Conference in Sydney.

 Main Buyers (This Week)