The Reserve Bank's decision to hold the cash rate was an early Christmas gift to many in Australia, but the wool market was an immediate beneficiary as auction momentum ramped up on Wednesday and Thursday.

The AUD/USD exchange rate has played a critical support role for commodities this year and recent upward movement has impacted the market. A recent upward movement in the exchange rate has been tied to improving sentiment around the Interest rate path being taken by the US Federal Reserve. The Aussie dollar did trend lower however after the RBA’s decision to not alter the cash rate which lifted pressure off wool pricing. The Eastern Market Indicator (EMI) improved 11ȼ to 1177 ȼ/kg and is just 8% lower YoY but spurned by the easing of the exchange rate the EMI expressed in US$ eased 7ȼ to 770 USȼ/kg.

In Sydney, improvements were strongest for finer micron price categories, after Tuesday’s mixed results were followed by strong demand on Wednesday (which had a daily pass-in rate of 3.7%).  18MPG in Sydney improved 35 ȼ to 1627ȼ/kg and 20MPG increased 14 ȼ to 1368 ȼ/kg.

Improvement in finer microns continued further South to Melbourne, with 17MPG jumping 71ȼ to 1855ȼ/kg and 18MPG climbing 49ȼ to 1632 ȼ/kg.  Pass-in rates on average were the lowest for Southern markets this week (5.7%) with bidding strongest for fine merino lots under 4% VM. 25MPG crossbred wool in Melbourne increased 14 ȼ to 736 ȼ/kg.

The West bounced back this week with all price categories improving on the week. 18MPG increased 24ȼ to 1597ȼ/kg and 19MPG sits at 1399 ȼ/kg a rise of 19ȼ. The average VM for merino fleece this week was 1.1%. The Western Market Indicator sits at 1305 ȼ/kg and as similar to the other side of the country, sits just 8% lower YoY.

Andrew Woods investigated the impact of the dry spring, most of the Merino sheep regions experienced this year on supply for 2024 (read here).  A shift finer in the merino micron distribution has implications for the supply of fine and broad merino micron categories in 2024. It also has implications in terms of volume as clean fleece weight tends to be positively correlated to fibre diameter. 

Next week

Santa claus will be here in 17 days, and the Christmas recess is two sale weeks away. Auction volumes will be substantial as the supply chain gets its affairs in order.

50K bales are scheduled next week, with Sydney and Fremantle selling on Tuesday and Wednesday. Melbourne will sell Tuesday, Wednesday and Thursday.

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Data sources: AWEX, Refinitiv, Mecardo

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