WEEKLY MARKET REPORT

Week Ending 6^th May, 2016

AWEX Northern Micron Indices Comparison

MARKET HITS ANOTHER PEAK!

 The change in sentiment last sale that saw the market claw back some of the big losses of 3 weeks ago continued this week as buying patterns became a little more urgent, especially on the opening day. The market rose by another 27 cents to 1268, just 2 cents shy of the latest peak of 1270 set after Easter. In US$ terms the movement was minimal - only a 5 cent increase to 951 cents. The driving factor, of course, was the collapse of the A$, at one point above 78 cents last week to 74.50 on Wednesday.

The market opened with a bang on Wednesday and consolidated these rises on the final day with a subdued increase in most fleece categories. All micron indicators recorded solid gains (30 to 50 cents with the odd finer lot in the best top-maker and superior types 50 to 70 cents higher) as these types have virtually run out till the spring. At the other end of the spectrum some of the heavier burr types >4% VM looked to have marked time to be unchanged. It was interesting to note that 21s, after hitting 1400 cents on Wednesday, couldn’t maintain this level slipping by 3 cents to 1397 - the only indicator to fall on Thursday.

Room 2 types followed the fleece room’s lead as all types gained ground. Fine types <19 micron with <5% VM posted rises of 50 to 60 cents, while burrier lots were 40 to 50 cents up as broader lots >19 micron gained 30 to 40 cents. Cardings also clawed back some of the big losses of a fortnight ago as the MCI put on 25 cents with all types adding 20 to 30 cents to their values. Crossbreds also had a solid sale with all microns from 25 to 32 lifting by 10 to 25 cents.

The tight supply, reasonable demand and the weaker AU$ all combined to lift the market. The decision by the RBA to drop interest rates to a record low of 1.75% following on from the release of poor inflation numbers last week was the catalyst for the fall in the exchange rate of 2.35% - the biggest one day fall in almost 5 years. Some experts are forecasting a return to high 70s for the AU$ and maybe to break through the 80 cent mark next year as the local economy improves and commodity prices continue to rally and a peak in the US$ helps the AU$ over time but  we could still see some downside in the A$ before this happens. The budget, though not outstanding, also helped the currency stay stagnant on Wednesday as most commentators described it as “in a safe pair of hands” without any real shocks as spending growth is controlled and measures to chip away at the deficit and raise revenue such as reining in welfare cheats, a higher tax on tobacco, multinationals avoiding tax and the wealthy using superannuation to park money in a low tax environment.

The coming few sales will be critical as to where the market might head in the short term. Currency fluctuations will be a major player in determining price direction. Quantity won’t be as influential as national quantities will average low to mid 30,000 bales. We sell late next Thursday with an 800 bale catalogue with most players looking for the market to consolidate at these levels, buyers reluctant to keep 21s above 1400 cents.

This week marks 5 years since we held our 1^st sale. A quick look back had the EMI at 1294, 17s were 2368, 19s 1586 and 21s 1266. The MCI was 780 cents and the exchange rate was AU$1 bought US$1.08. Things just a little different now!!

Main Buyers (This Week)