THE combination of a stronger dollar and price resistance from overseas forced the market to slip back a little this week. As expected the market was around 30c cheaper (AWEX’s eastern market indicator closed on 1507c, down 26c), although the movement in US dollar terms was far less with a drop of only 4c leaving the market still facing some price resistance in overseas markets.
Superfine and medium Merino types both eased 30-50c in the eastern centres, with Fremantle playing catch up from the week before. Skirting wools were strongly sought after while the crossbred sector was generally firm with the exception of the finer edge which followed the Merino segment down a bit.
AWEX’s northern market indicator closed down 21c on 1578c. The 17 micron indicator closed on 2164c, 18 micron 2130c, 19 micron 1859c, 20 micron 1634c, 21 micron 1543c, 28 micron 756c, and 30 micron 558c. AWEX’s indicative 185kg bale price was 17 micron $2586, 19 micron $2218, 21 micron $1846, 23 micron $1706, and 28 micron $910.
The first week of the new season brings a large offering as some growers look to manage their cash flow and taxation liabilities, and given the ongoing difficulties being reported by traders overseas with a weaker US dollar most would expect a similar result again next week.
Although with the three-week auction recess looming after one more 30,000 bale sale topmakers and greasy traders will be looking to ensure they have everything covered and adequate stocks to get them through the break. As is often the case when the wool market looks set to follow a clear pre-determined path it surprises us. With the increased volume of next week offering and a strong local currency the path seems plainly simple, but already some customers overseas are coming forward with inquiries in the hope they can tap into the predicted step down in prices.
On the back of a very positive knitwear yarn exhibition Pitti Filati held in Florence during the week Italian companies are among those looking to cover some orders that have been placed for the forthcoming year. Inquiry for knitwear types has been trending finer at present with 16.5-micron still looking cheap compared to cashmere even at current price levels.
With recent drought breaking heavy rains in Argentina the availability of finer wools from that part of the world will become less compared to the relative abundance of hunger fine wools they supplied to the trade last season. Providing the seasonal conditions in Eastern Australia continue to be favourable and El Nino stays away as meteorologists are currently predicting, buyers of the finer knitwear types will have to compete strongly to source raw material, which is no doubt behind some of the early inquiry we are seeing already.
Merino knitwear is a growing segment of the market thanks in part to long-term marketing campaigns and also consumer education and awareness of the benefits of the Merino compared to the other plastic rubbish. Some people have made positive comments this season about the amount of Merino available in mainstream shops in Australia this year.
On the charts... 21-micron has potential to increase further.
Although the local market is miniscule in terms of the amount of woollen garments sold annually it is presumably a reflection on what is happening around the globe. So if the likes of Country Road, DJ’s and Myer et al have more wool on their shelves they have just followed the trend of the Northern Hemisphere and we can see that demand has increased and why wool prices are rising. Obviously the challenge is to maintain the demand and keep prices rising, slowly and steadily, preferably.
Price resistance for superfine types is still being mentioned in China and other markets, and it is causing the basis to continue to contract, but it is more likely to be a seasonal effect rather than a long-term trend. In simple terms processors are able to sell medium Merino types more easily at present and so they are looking to buy these types as a cash flow positive aspect at the moment, although those who hold current stocks of superfine wooltops are finding some prompt enquiry providing the quality is up to standard.
On the charts the superfine types appear to have peaked while the 21-micron has potential to increase further. The overall picture remains positive, with probably some downside on the back of the large offering next week before a flurry of last minute buying that could see the market lift further before we enter the recess.
The currency markets continue to make life challenging with a declining US dollar the main driving factor in play at present. The Australian dollar appears strong as a result, but also a stronger Euro is starting to become a problem for some processors over there.
Exports from Europe suddenly look more expensive, and this is certainly not what the exhibitors at Pitti Filati were hoping for at this point in time. However wool always has been, and will hopefully continue to be a luxury fibre, and given that it makes up only 1.3 per cent of the world’s apparel consumption, those who can afford wool will be able to pay the increased prices next year.
Superfine: The volume of greasy wool available is slightly more than the current demand, allowing the basis compared to 21-micron to continue to decrease, but as the new season approaches demand looks set to increase again so we should see the basis stabilise shortly.
Medium Merino: Providing the market does not take a fatal hit early next week, it should be able to recover and finish strongly.
Crossbreds: The outlook for finer than 30 micron is beginning to look more favourable as stocks have diminished. However, demand for the broader types still looks challenging.
- Bruce McLeish is Elders’ northern wool manager.