THE seasonal drift pattern for the wool market remains intact at present with superfine wools continuing to come back to the pack, and medium Merino prices slightly cheaper during the past week.
AWEX’s eastern market indicator eased by 23c to 1472c in local currency terms, while a volatile currency market saw the price in US dollars ease by 34c, and European prices down by 29c.
Superfine types were most affected, with only the few lots available with excellent specifications able to remain unchanged in price. Demand has switched to the ‘safer’ medium types at present and in general these wools were unchanged in price apart from the ongoing discounts in place for inferior lots. Carding wools were in short supply and tended to be a little dearer in most centres, while crossbred wools also finished in positive territory.
AWEX’s northern market indicator closed down 33c on 1547c. The 17 micron indicator closed on 2183c, the 18 micron 2088c, 19 micron 1836c, 20 micron 1564c, 21 micron 1476c, 28 micron 755c, and 30 micron 563c.
Topmakers, who are now obviously predominantly in China these days are retreating to ‘safer’ products at this slow time of year. There is some stock of superfine wooltop hanging around in stock and with little demand at present for these types topmakers are reluctant to purchase new greasy wool, which may simply add to this stock.
Demand for medium Merino types (21 and 22.6) is sufficient to keep mills active, although the Chinese domestic wool will replace some of the demand for Australian wool in the next month or so. This explains a lot of the current market movements in Australia with the premiums for superfine contracting from their extremes seen earlier in the season, and despite very small offering quantities (only 28,000 bales this week) the medium Merino types are holding their ground.
The good news is that with Europe soon to begin the important fairs where manufacturers will exhibit the new range of fabric and yarns a resumption of buying activity may not be that far away. These fairs are being held earlier than usual this year and as most manufacturers need to lock in raw materials once they have at least some buying indication from their customers, we could see an earlier start to the buying season for greasy wool as well. This will present an interesting conundrum for some participants given that the Australian market is in recess for three weeks from mid-July onwards and the South African two month recess kicks in after next week’s sale.
The world’s view on the Merino fibre remains optimistic.
So, while many growers in Australia look to the heavens for a bit more moisture, particularly those trying to plant wheat and other crops, the world’s view on the Merino fibre remains optimistic. If indeed we do receive a boost in demand from the forthcoming fashion fairs, or a significant uniform order comes to fruition in China we may be able to finish the current selling season on a high note. The current, and forward wool prices, combined with favourable comparisons for alternative ag enterprises will no doubt arrest the decline in wool production and possibly see a slight increase next year, but there are plenty of growth opportunities out there at a retail level to consume any small production increase that does eventuate.
The newer fabrics and products being delivered all require high performance fibres in their manufacture, so one can expect the market to remain critical for those parameters which adversely affect production yield and performance. Simply producing lots of kilos of tender, high mid-break, unstylish or overlong Merino wool will not be a good scenario for growers.
The high prices being charged for the premium garments that do perform either on a technical basis or in a fashion sense need to be supported by the quality of the raw material and many of the designers and manufacturers are demanding more and more stringent quality from the topmaker and spinner. There is, and probably always will be lots of outlets for wools that do not meet the tightest of specifications, but we can expect the differentials in prices to continue to widen as time goes on.
Of course the fashion gurus and more so the retailers need to have a firm eye on consumer sentiment around the world, not in Australia but in markets where numbers of consumers are sufficient to support their programs. While it is nice to see some Australian wool being sold in Australia the consumption in the ‘big’ markets is what will inevitably make-or break the wool industry.
With Donald Trump lurching from one crisis to another some are becoming a little concerned about the US situation, but we will probably see shortly that the Federal Reserve acts independently and the American economy is improving enough for them to raise interest rates again at the June meeting. The populist movement that appeared to be taking hold in Europe appears to have been snuffed out for now, and while they are still printing money over there, at least things are stable and they are in control of their destiny now. As China continues to mature and interact with other regions such as Europe on more platforms their standard of living continues to increase.
With one-fifth of the world population, and probably some of the most polluted cities in the world, clean and green, sustainable things matter there. The great thing about the promotion of Merino in China is the relative ease with which we can communicate via social and electronic media. China is one of the world’s most avid users of e-commerce and so advertising or promoting your message is not as difficult as traditional forms of communication. Because merino slots nicely into the environmental, sustainable category – at the premium end – there are more customers available and reachable every day in China.