Currency up, wool prices down

Wool prices slip with US dollar


Sheep
US DOLLAR: Australian wool prices suffered at the hands of the currency market last week.

US DOLLAR: Australian wool prices suffered at the hands of the currency market last week.

Aa

Australian wool prices suffered at the hands of the currency market last week.

Aa

CURRENCY up, wool prices down. In a reversal of the previous week prices at wool auctions across Australia suffered at the hands of the currency market last week as a softer US dollar brought about stronger currencies generally across the globe.

Overall the market in Australia eased by 24c with the eastern market indicator (EMI) closing the week at 1287c. In US dollar terms the market was 6c stronger, while European buyers also saw prices increase by a similar amount. The best superfine Merino lots weathered the storm and were only slightly lower whereas the freely available ‘bread and butter’ medium Merino types eased by as much as 40c.

Skirting types and carding wools found buyer favour given the lower volumes available and the carding indicator managed a positive gain for the week. Crossbred wools again struggled for momentum and followed the medium Merino wools south by as much as 40c.

Looking at the market in US dollar or Euro as most international buyers do, everything is stable or unchanged. The larger volume of medium Merino fleece may have challenged the buying limits available for these types in the short term.

The total volume of wool being last week auctioned was not large, but the proportion of medium Merino fleece wool did overload a few order books. Rostered quantities in coming weeks will be watched carefully as at this stage they are higher than the same period last year, but with so much wet weather of late, getting sheep shorn and wool delivered to store is certainly a welcome challenge for many.

There is no doubt that the seasonal conditions this spring will lead to an increase in wool production next year, and with it the accompanying increase in total clip micron, which will be welcomed by the international trade. The challenging growing seasons of the past few years have led to an ever-decreasing volume of wool available, but at the same time an increased proportion of superfine wool. This extra supply of superfine wool has been invariably of inferior quality that the trade has found difficult to find a home for at times.

The outcome has been a compressed basis between microns, and negative perceptions generally among the superfine growing fraternity. Hopefully the better growing conditions will go some way to alleviating these problems by further increasing the basis for those who grow the correct style product.

Away from Australia’s shores preparations for the coming season are continuing as Autumn rolls in. some cooler conditions in parts of northern China are already presenting opportunities to test the new season fabrics, such as the much talked about ‘fake fur’ product that has been developed specifically for the Chinese domestic market.

In other parts of the world the weather is still quite mild but definitely beginning to change with temperatures in the mid teens across Europe and Russia last week. This will encourage consumers to begin to consider what new items they will need for the coming winter, and allow retailers to use their flair and promote the benefits of wool. There is already quite a level of anticipation building among the trade for new yarn and fabric items being presented for the following year at exhibitions such as Premier Vision in Paris, Spin Expo in Shanghai and also the Textile Fair in Moscow.

Wool is becoming desirable and sought after, so much so that some less scrupulous manufacturers are using the “pure wool” label in order to increase asking prices on their garments. The premium luxury brands have been fighting for their intellectual property rights and brand integrity for decades, and perhaps the wool industry will face similar challenges on a larger scale than previously as it moves further up the value chain.

While there are plenty of positive signs throughout the industry at present, it is still too early in the production cycle for a sustained upturn in price to be established – and maintained. Low stocks, positive signals about next seasons collections and wool’s burgeoning luxury fibre status will be tempered by caution over increased supply and economic fluctuations.

The market is not complaining yet that the price of wool is too high, but continued volatility in currency markets are providing enough uncertainty in buyers minds for the market to switch direction overnight. This should play out over the next four to six weeks and barring any major economic catastrophe such as a Trump victory the scene should be set for a sustained period of increased prices. Already commentators are beginning to talk favourably about commodities in general and history shows us that wool often leads the way to economic prosperity.

Superfine: For those growers who are able to produce the best quality superfine wool buyers will be active in coming months, however they will remain selective in terms of style.

Medium Merino: The Nanjing Wool Market Conference held over the weekend in China struggled to produce much in the way of new spot business despite a positive tone to the presentations during the conference. This means that there is unlikely to be a bounce in the short term for the medium merino wools. Downside is limited to 30 or 50 cents on the charts, but currency will also play a part.

Crossbreds: The hand knitting yarn market in Europe is doing well, in China not so well. So the outlook for 28-32 micron is still far from buoyant, however given current basis to Merino wools, it will be difficult to see them moving much further away from Merino prices.

- Bruce McLeish is Elders northern wool manager. 

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