THE Australian wool market eased again in a nominal sense last week with a continuing pattern of good wools maintaining their values, and poorer styles being sold lower.
Overall the AWEX’s eastern market indicator closed down 6c in local currency terms, 14c and 15c lower in US and Euro respectively.
Superfine wools continue to settle back down to earth after a stellar season, while medium Merino types also eased in the main, with the exception of the broader microns that were able to gain a few pennies. Skirting types were stronger in most areas as the better quality offering gave buyers the opportunity to ‘pin their ears back’ and fill some orders again. Crossbred wools, especially those clips offered with traditional preparation standards were able to maintain their strengthening bias and pick up close to 30c for the week.
AWEX’s northern market indicator closed down 15c on 1837c. The 17 micron indicator closed on 2764c, 18 micron 2301c, 19 micron 2037c, 20 micron 1922c, 21 micron 1888c, 28 micron 859c, 30 micron 610c.
Buyers searched for value and tried to milk out any cheap lots across the nation. The result was all indicators now line up across the three selling centres nationally. This ‘evening out’ of prices across the board is often a harbinger to stronger prices in the week ahead as there are no cheap quotes for customers to focus on and negotiate with. It usually turns out that the market has found a base and will rise temporarily at least.
However, with no sale during the Easter recess the trade has two weeks to establish the direction of the next step. The currency will obviously play a part in the fortunes of grower prices as it always does (in the short term sense). Following the pattern of recent weeks, the Australian dollar has arbitrarily eased after the end of the wool selling week, actually achieving a fresh low point for the year of US76.5c against the US dollar. This should auger well for local wool prices, but one week is a long time in the currency game, let alone two weeks to allow for the Easter recess, so we could be anywhere on the chart by the resumption of sales on April 10.
Buyers overseas of course value their purchases and sales in US dollar, Euro or Renminbi terms, although the tone of the market in Australian dollar can sometimes have an effect on their psyche and willingness to participate. So depending on what utterances are made by the various market movers over coming days the currency will gyrate around but hopefully we will still have favourable currency terms to restart the auction series again in a few days time.
From a glass half full perspective the outlook is not far from outstanding.
- Bruce McLeish, Elders northern wool manager
Processors along the wool pipeline are moving into an interesting phase with most of the raw material for this season already purchased and just a few clean-up orders still to be negotiated. We may still see a late flurry of business if there is a particular fashion item launched, just as we did when the fake fur product was launched in China. In the absence of any new product being released and pre-ordered in a big way, we should see the market to continue to drift along with more or less one step forward, two steps back progress through until the end of the season.
This normal seasonal pattern will see the market reach a base in August from where the uptrend of the past two years can be continued, or in the worst case broken and prices head south. There is nothing to suggest at present that the long-term ‘up-cycle’ should not continue with supply side growth relatively restricted by competing enterprises and seasonal conditions.
On the demand front there is still huge potential for growth with so many of the world’s consumers remaining oblivious to the qualities of Merino and its suitability for warm conditions for example. AWI and its partners around the globe are pushing this and other messages, extremely well and at the same time maintaining the elite fibre status of merino, without which the fibre will slip back into the commodity zone again alongside cotton and polyester with prices to match.
So while the upward trend for wool has been running for more than two years now, and would normally be expected to ‘roll over’ and head down again there is hopefully enough new development and paradigm shifting marketing in place to prevent this from occurring. The superfine and medium Merino types can, and probably will, ease by another dollar or two during the off-season and still be well on track to continue the long-term uptrend we are all enjoying.
It will be beneficial for the longer term if prices do follow this predicted path and ease in the coming three months, as this will allow some of those who currently sit on the sidelines, forced out by the sudden price rises, to re-enter the market place. While they may still struggle to keep up again this time next year, at least they will have the opportunity to go around again for another year and keep enjoying the Merino fibre.
From a glass half full perspective the outlook is not far from outstanding. Even with a gradual easing of the market by a dollar or two towards the spring, we will still start the new season a dollar or two above last year’s levels. Those levels proved to be the start of an exceptional season, and there is no compelling reason we cannot expect the same again.