Wool market rises to 1550c | Elders

New season wool market rises to 1550c


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IN DEMAND: The resumption of sales saw AWEX’s eastern market indicator rise to 1550c.

IN DEMAND: The resumption of sales saw AWEX’s eastern market indicator rise to 1550c.

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The resumption of sales this week saw AWEX’s eastern market indicator rise to 1550c.

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THE wool market resumed this week after the traditional three week winter recess, and although there were no fireworks, a good steady fire is currently burning to keep the market warm.

Forward selling prior to the auction opening indicated that market would be positive and the first selling day saw the market quickly account for the currency changes during the break, with AWEX’s eastern market indicator only increasing by 1c in Aussie terms, but US34c.

For the remainder of the week it was all positive moves to reach a total increase of 28c in local currency terms and plus 48c in US dollar. The Euro had gained slightly against the Australian dollar over the break and so in their terms the market rose by only Euro16c during the week.

Superfine types were strong, but did not lead the market with most attention being focussed on medium Merino fleece types and the finer crossbred wools. As buyers concentrated on the full-length fleece types, shorter prem shorn lots and skirtings trailed along but were certainly not as buoyant as they have been recently, and cardings actually eased during the week.

The futures market as mentioned pre-empted the rise by trading solid volumes and prices on Monday, and continued the activity during the selling week with sales of 21-micron as far forward as June 2018 at 1450c/kg. Prices of 1500c were achieved for as far forward as October 2017 as buyers sought to secure cover against forward sales, and no doubt growers took advantage of historic returns in light of some uncertainty around the globe.

The increase in the value of the Australian dollar in the past month has been more about the declining strength of the US dollar rather than the Aussie itself. The US dollar recently bounced off a 15-month low point, and it has lost some 11 per cent from its January peak as tepid US inflation data along with political turmoil in Washington has dented expectations of another Federal Reserve interest rate hike in coming months.

The latest verbal stoush going on with North Korea is playing directly into the hands of Kim Jong-un who wants nothing more than a perceived enemy to rail against for patriotic propaganda purposes at home, but this issue will certainly ensure volatility in currency and equity markets in the coming weeks. The wool market showed great resilience to overcome the initial hurdle of currency exchange rates this week, and overcome a large volume offering with such a positive response. The usual ‘spring flush’ seems a little way off at present with the next three weeks providing less than 40,000 bales per week at this stage.

Given that we are in the middle of August there is very little downstream activity in Europe at present. All of Italy is basking in the excessive heat for the rest of the month. Some German companies have just returned to work as have the Russian fraternity but purchasing activity is confined to quotations and reminiscing about the summer holidays.

Meanwhile, China has been in full swing and had obviously consumed all of the greasy stocks sent up there in July. Chinese interest firms dominated the buying activity in auction this week and comments from China indicate that the majority of the product is destined for Fake-Fur products. This product has become the latest fashion trend among the Chinese consumers, or so it is predicted to be when the weather actually cools down enough, as was double-faced fabric a couple of years ago. The fake fur product is relatively heavy, and so consumes a lot of wool per metre, and obviously requires longer fibre, hence the concentration in this week’s auction for full fleece rather than prem shorn wools or cardings. The majority of the product has been geared towards 21-22.6 micron merino, but as prices increased some firms have pushed out towards Type 58 (24-micron) and 56 (26.6-micron), which are often created by blending 22 and 28-micron together, which led to the resurgence of finer crossbred wools this week.

The market nervously awaits the return of other buyers, or other end users to compliment the current driver. The mainstay of the industry in historical terms, worsted fabric production is lagging behind at present, but given the time of year we are in, this is not particularly unusual. The products that created the current high prices, new active and casual wear fabrics are still selling well across the globe. Once the music stops for the fake-fur production cycle people will be hoping there are enough chairs to go around for the other products. The next month or so will be very interesting for the wool market with the doom and gloom merchants looking for the bubble to burst, and the optimists looking for the uptrend to continue.

AWEX’s northern market indicator closed up on 26c on 1614c. The 17 micron indicator closed on 2227c, 18 micron 2153c, 19 micron 1853c, 20 micron 1648c, 21 micron 1576c, 22 micron 1519c, 28 micron 817c, and 30 micron 608c.

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