Wool market gains 10c

Small offering lifts wool market 10c


Sheep
PRICE RISE: The wool market made positive gains to close 10c/kg higher on the back of a small offering.

PRICE RISE: The wool market made positive gains to close 10c/kg higher on the back of a small offering.

Aa

The wool market made positive gains to close 10c higher on the back of a small offering.

Aa

DESPITE the Chinese sector being on holiday for National Day the wool market in Australia made positive gains and closed 10c higher on the back of a small offering.

Melbourne was playing catch-up to other markets after sitting out the previous Thursday’s price rise, but prices in Sydney were generally stronger, while Fremantle saw medium Merino lose some ground. Again buyers showed a preference for high quality wools and discounted those with lower strength or high mid breaks.

The divergence between superfine and medium Merino wools continued as demand for the latter remains somewhat subdued at a time when their supply appears to be growing. Knitting types fared very well highlighting the commencement of the knitwear-processing season across the globe.

Crossbred wools again meandered along seeking some direction, that as yet, this season has not been forthcoming. Widespread rain and delayed shearings are playing havoc with the forward roster and wool availability leading to many enquiries from overseas buyers about supply in the forthcoming season.

Although on the technical charts the wool market has broken its rising trend line of the past 12 months, and is perhaps susceptible to a fall of up to US15c, the futures market would beg to differ. Prices for 21-micron contracts lifted across the strip this week with 1400 being traded for Late October and 1350 seeming to be the base level for 2017 and also 2018.

In years past the futures market, even in thin trading volumes has been an extremely good indicator of market sentiment. The spot market during September and October is often fickle whilst processors are searching for concrete orders and feedback from retailers is hesitant. However, there is little on the horizon to suggest that the future will not be positive.

The northern market indicator closed up 8c on 1341c. The 17 micron indicator closed on 1615c, 18 micron 1602c, 19 micron 1534c, 20 micron 1411c, 21 micron 1391c, 22 micron 1359c, 28 micron 771c, and 30 micron 603c.

In the latest update of its World Economic Outlook, the IMF said that a drop in US growth for 2016, due to a weak first-half performance would be offset by a strengthening in Japan, Germany, Russia, India and some other emerging markets according to a recent HSBC note. All of these markets are very important to the wool industry, and with the inclusion of China account for a huge percentage of consumer demand for the end product.

A flurry of data from China in coming weeks is expected to show modest improvement in the third quarter as a government infrastructure spree and a housing boom boosts demand from steel and glass to furniture and appliances. There is some concern building around the level of debt the Chinese Government is accumulating. However, nobody is quite sure how much debt is too much in this new world order of government stimulation.

What we can be sure of is that the background factors for the wool market continue to improve block by block, and should mean that once the calendar has ticked over from the fickle month of October the rising trend should be re-established.

Cotton, for more than two years now has been living under the shadow of a massive Chinese Government owned stockpile amounting to nearly a year’s worth of global production. Essentially established following the massive price spike in 2011 that saw mum and dad investors flood into the cotton futures market, only to lose heavily as the bubble burst.

Unlike wool, the cotton fibre degrades reasonably quickly when stored in its natural state, and although keeping a close eye on the market to ensure another bubble does not eventuate the Chinese government has been effectively reducing the stockpile without swamping the market. Current cotton prices are closer to US70c/lb rather than the US60c/lb that had been the upper limit for the couple of years post crash.

Synthetic fibres are also trending upwards again in price having spent more than a couple of years in the doldrums. While wool is forging ahead on its way to becoming a premium fibre rather than a commodity, the relative price equation is still important for some manufacturers. When competing fibres are also trending upwards there is less consternation about the increasing price of wool for these processors.

So the wool market will essentially mark time during the month of October until next years ordering intentions become a little clearer but we should maintain the 100c buffer on prices at the same time last year which is a handy price increase to take to the bank.

Superfine: Prices compared to last year are more or less 150c higher at present and rising which sets a good precedent to build upon, and one which should be maintained given excellent seasonal conditions across most wool growing areas.

Medium Merino: Even with the major customer taking the week off last week and buyers being a little more hesitant than usual the spot market held reasonably well, thanks in part to a more or less stable currency. The market has weathered a rise in the Australian dollar recent months and if the pundits are correct, Australian growers should collect the benefit as we move back towards ‘fair value’ of around 70c or 72c.

Crossbreds: Another lacklustre performance in the auction market for crossbred wools both here and in New Zealand does little to suggest an upturn in prices in the short term. Expect this segment to drift in line with the merino market for coming weeks.

- Bruce McLeish is Elders northern wool manager.

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