WEEKLY MARKET REPORT

Week Ending 29^th April, 2016

AWEX Northern Micron Indices Comparison

MARKET REBOUNDS … BUT FOR HOW LONG?

 The change in sentiment late last week certainly flowed through to this sale. The gains in the EMI were a complete and identical reversal of the previous sale’s losses, up 24 cents to 1241. In US$ terms the change was minimal - just a 4 cent loss to 946 cents - again exchange rate shifts the dominant factor. Unlike the sale immediately after Easter the gains in the market were far more measured and controlled with both days’ rises much the same. While the bidding was spirited and keen, the “panic buying” was not evident like 3 weeks ago. Rises were across the board as 17 to 23 micron lifted by 30 to 50 cents with <16.5 up 20 cents (spinners and best top-makers <18 micron gained 60 cents). The low VM types came under most pressure as volumes of these become scarcer whereas high VM lots were being discounted as their numbers grew. Merino fleece types carrying over 1% VM accounted for 53.5% of the national catalogue, a 2 year high (reflecting the seasonal conditions especially in NSW and VIC). The rising market saw discounts shrink and clearance rates escalate, over 99% of fleece in Sydney was sold on Wednesday

Skirtings didn’t have the buyers’ urgency that the fleece types had but still managed subtle gains of 5 to 10 cents. Crossbreds had a mixed sale as finer types <26 micron looked up to 10 cents better as broader types were flat to buyers’ favour. Cardings shook off last sale’s collapse to finish the week unchanged.

A good rebound in the market after the big losses of the previous fortnight. The sharp fall in the exchange rate of over 2 cents looked to be the catalyst for the market to gain momentum throughout the sale. The A$ had its largest 1 day fall in 8 months due mainly to poor inflation data speculating talk of an interest rate cut next week. The release of the “deflationary” March CPI figure saw the A$ collapse to just over 76.50 cents. The annual rate of inflation of 1.55% is the lowest since records started in 1983. Whatever the decision of the RBA next Tuesday, it will move the A$ - up or down depending on the decision of the board.

Also helping the market was the smaller national offering. At 34,300 bales this was the smallest national catalogue since late September and, with only 5.6% passed-in, this saw 32,500 bales cleared to the trade. The small volume of prompt supply locally and low global stocks of merino fleece has this sector sensitive to currency movements as demand remains steady and any improvement in demand will see a price rise regardless of currency shifts. Demand for crossbreds and cardings remains speculative as uncertain demand levels have these types struggling to find a firm basis but these types are coming off record highs over the past year.

Quantities rise slightly to 38,000 bales next week as some sort of consolidation at these levels would be a good outcome. With the budget due to be handed down next Tuesday and the RBA Board to meet and decide on an interest rate cut, it will be worth following to see how the A$ will react on Tuesday night in European and US markets. We sell 1^st up on Wednesday next week with a catalogue of 1540 bales, the largest catalogue in Sydney.

                                                               Main Buyers (This Week)