AWEX’s eastern market indicator closed up 45c on 1623c which AWEX report is the new benchmark high, surpassing the previous record set in August this year.

In US dollar terms the EMI rose by a significant 35c, and Euro46c to keep buyers overseas wondering how to manage their purchasing decisions. Thanks to a global spread of buyers and strong appetite from the larger topmakers there were very few, if any weak spots in the market.

Superfine fleece as usual led the way with some specialist lots being quoted up to 150c higher for the week, while the general superfine Merino fleece rose by 80c. Medium merino fleece was not far behind with gains of 50-60c being the norm.

Skirtings and bellies followed suit and crossbred wool finally joined the positive side of the ledger with gains of up to 30c being common. The carding market illustrated how small it really is, and what happens when the processors need to secure quantity in a hurry by leaping 64c to close at a new record price.

AWEX’s northern market indicator closed up 45c on 1718c. The 17 micron indicator closed on 2454c, 18 micron 2246c, 19 micron 1968c, 20 micron 1713c, 21 micron 1608c, 22 micron 1511c, 28 micron 728c, and 30 micron 536c.

All the numbers above sound positive and will no doubt be welcomed by growers across Australia. However, the trade further along the pipeline are becoming a little bemused at this price activity given the sluggish response from retail at present. Yes, things look ‘okay-to-positive’ in the retail sector with plenty of innovation and sustainable environmental factors to help keep Merino products moving out the door, but current sales volumes are only ‘just there’.

A huge increase in the price of raw materials will make people very nervous about the future for the fashion collections they are currently trying to sell. Looking more closely into the activity of the auction this week does put some of this concern to rest however, with large processors obviously being very active. So the burst of frenetic activity has been brought about mainly because the overseas processors blinked first and decided to fill up their raw material stocks rather than hope that the exporting fraternity would set them with forward contracts.

With the current size of the Merino clip struggling to increase, even at these record price levels processors are keenly aware of the need to cover gaps in the availability of greasy wool auctions. Although auction sales are currently running around 8 per cent above the same time last season we know that production has not increased by anywhere near this amount.

The chart from AWEX showing forecast auction volumes for the next four weeks, overlaid with last years sale volumes is beginning to diverge in a scary way. Only scary for those who need to continuously purchase wool every week to fill machines, but really quite comforting for those who still have wool to sell, or have wool/wooltop in stock.

Where this leaves the market direction in the next couple of weeks/months will be interesting to watch from the sidelines, with a little more angst and pressure for those directly involved in the day-to-day trading. No doubt we will see a pull back in the Australian market in the coming weeks as cash flow restricts operations, or orders simply fill up, but then it will jump up again just as quickly.

Volatility along with a general uptrend for the next six months is about as good a prediction as any at this point. Other markets around the world such as the South African market are reverberating in the same way. Given that the Cape market is even smaller than the current Aussie one the effects can be more extreme. It was certainly the case over there this week with one major operator pushing their prices well above Australian levels. So while things are very good at present, we should probably expect a correction at some point, but it will not be overly severe nor last for too long.

Superfine: Both ends of the quality spectrum fared very well this week as the rising price of cashmere creates a demand for short superfine Merino as well as the Italian processors continuing to purchase what they need for the next season while their specific types are available. There is not a lot of noise out there at them moment to suggest prices in this segment will go down.

Medium Merino: The bulk area of the Australian Merino production sits in this range and with the 21-MPG above 1600c life is pretty good. 19-micron looks like it will hit resistance soon, but 21-micron still has room to rise, so while there will definitely be volatility the outlook for the next six to 12 months looks excellent.

Crossbreds: Even though the current increase is probably only due to high Merino prices and substitution it is welcome. New demand for the actual product will come along at some point, but in the meantime if these wools follow the Merino prices upwards who is to complain.

- Bruce McLeish is Elders’ northern wool manager.