Wool market eases 43c | Elders

Wool market eases 43c


EASING TREND: The eastern market indicator closed on 1459c, down 43c for the week.

EASING TREND: The eastern market indicator closed on 1459c, down 43c for the week.

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The eastern market indicator closed on 1459c, down 43c for the week.

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A CONTINUATION of the corrective move, then a flattening out and finally some improvement occurred during the wool market in Australia during the past week.

Any correction in a commodity market usually lasts for two to three weeks so it was no surprise that the market followed last weeks down trend and remained softer on Wednesday. However as usually happens, once it reached the bottom, buyers ramped up their activity and the final hours of selling activity on Thursday saw strongly rising prices.

Overall AWEX’s eastern market indicator closed on 1459c, down 43c for the week, with a slightly larger fall in US dollar of 51c being registered. Again the discounts applied to the poorer styles of wool increased and the average micron price guides hide the real trend of the market somewhat. With the better types being less affected, but the lower quality wools being hammered by the trade. This sends the correct message to wool growers, that quality matters just as much as micron, and it is only when quantity is limited that they are rewarded for producing lower quality wool.

AWEX’s northern market indicator closed on 1549c, down 38c. The 17 micron indicator closed on 2267c, 18 micron 2103c, 19 micron 1798c, 20 micron 1486c, 21 micron 1375c, 22 micron 1303c, 28 micron 730c, and 30 micron 575c.

The next three-week period will be challenging for the wool market but the underlying tone still remains positive. Next week will see 46,000 bales sold on a Tuesday/Wednesday roster to allow for an early close to the week for Easter, followed by a one week recess, meaning buyers will need to be ‘on the front foot’ to keep enough wool flowing through shipping channels to serve hungry machinery.

The resumption of sales currently has an offering of 47,000 bales for the week, but given that 16 per cent of this week’s offering was passed in, and a similar volume last week, a large chunk of those wools could find their way into the first sale after Easter and literally flood the market again. Hopefully the collective thoughts of growers will be to spread their wool over the next few weeks rather than dump it into the market as quickly as possible, which would undoubtedly challenge the price recovery we have seen this week.

Although the processing season is marching along with time running out to purchase greasy wool, ship it to processing mills, and begin the long process of creating a final garment to have it ready for the major selling period of autumn/winter 2017-18 – much more wool is trans-seasonal than in the past.

A group of Elders wool growers were lucky enough to visit the Nanshan Textile Group during the past week and see 18.5 micron greasy wool enter the scouring plant, and then follow the process right through to completion of high quality men’s suits destined for the Japanese market. They all gained an appreciation for the multitude of different processes involved, the quality control required to manage the variability of a natural fibre and the huge investment and commitment required to process what they, the wool grower, produce on farm in Australia.

During various Q&A sessions on the trip it was apparent that processors in China are more concerned about understanding the production forecast for the future to try and get a handle on forward supply, rather than complaining about high prices. The industry can accept and eventually pass on higher prices, providing the volatility is minimal. Within a particular season it is difficult for a processor to adjust prices of the fabric or suit, but when prices remain stable across seasons, or even gradually increasing it is easier to have these discussions with the final customer and maintain their profitability.

At present the longer term outlook remains optimistic, and whilst the market experienced the correction ‘we had to have’ the futures market for forward prices has been relatively unaffected. In fact as Garry Booth from Southern Aurora Wool pointed out, the physical market retreated 50c to 80c during the week, but the forward market only came off 20c – with the industry ‘knowing’ that it was only a temporary dip to take some of the steam out of the market.

There still remains plenty to be positive about for the Merino industry with sales of active and causal wear products increasing and also a planned foray into merino business shirts which will open up a whole new market segment. Providing the world leaders can keep the global ship steady and control the rogue elements, life as a merino grower will continue to be very rewarding. Data from the US, along with the word-by-word analysis of Federal Reserve comments that the media is obsessed with these days continue to underline the recovery in the US economy.

Historically the US has been a poor performer when it comes to wool consumption, with only the Wall Street bankers wearing wool suits, but now with the growing number of brands retailing active and leisure wear made from Merino it would be safe to assume that consumption of wool per capita in the US is actually increasing again. In Europe there are a few worries, but plenty of European manufacturers are export orientated and taking advantage of the US recovery, and the uprising of populist political parties across Europe appears to be dying out which is good for the stability of the region.

Superfine: The re-emergence of India after a number of quiet seasons has provided a boost in competition for all Merino types, but particularly in the superfine segment when Italy has dominated but China has been a bit quieter than expected.

Medium Merino: Stock levels of greasy wool remain at historic lows and once the current surge of medium merino has moved through the system in the coming month volatility should decrease again.

Crossbreds: Conversely stock levels for crossbred wool all along the pipeline will take some time to clear, but increasing synthetic prices will assist this process.

- Bruce McLeish is Elders northern wool manager.

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