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Australian wool market faces downturn despite limited supply

This week’s Australian wool auctions encountered somewhat unexpected tougher market conditions. Buyers, both locally in sale rooms and overseas, generally downshifted to safety mode, awaiting better demand signals indicating acceptance – or otherwise – of the recent price rises gained over the previous weeks.

Despite the exceptionally small volumes available, due mostly to Western Australia not holding an auction sale, prices still lowered by around 0.8 per cent within the Merino sector. Skirting types largely held onto their values whilst cardings dropped a few cents. The crossbred sector gained 10 cents, the Australian Wool Innovation (AWI) said in its commentary for week 51 of the current wool marketing season.

This week’s Australian wool auctions faced tougher-than-expected market conditions, with prices in the Merino sector dropping by 0.8 per cent despite low volumes.
The skirting types maintained their value while cardings dipped slightly, and crossbred wool prices rose by 10 cents.
Buyers are cautious, awaiting better demand signals and larger supply weeks.

Perhaps manufacturers and traders who were wanting to buy decided not to spook the market. Trying to execute contracts in a very limited supply situation would have pushed price levels higher, taking sales on the books into loss and limiting future selling opportunities. The first sales of the new Australian financial year usually see large volumes hitting the market, and holding off to purchase into larger supply sale weeks was maybe the strategy.

The stronger Australian dollar against the major trading currencies accounted for more than half of the price depreciation this week. It has been widely reported that the Reserve Bank of Australia (RBA) will probably be one of the last G10 central banks to cut interest rates, placing further upward pressure on the AUD against the majors, the AWI commentary added.

All selling centres will be in operation next week with 40,000 bales to be offered, potentially providing a clearer picture of market conditions and future trends.

Fibre2Fashion News Desk (KD)

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