Wool market up despite stronger dollar | Elders

Wool market up despite stronger dollar

ON THE RISE: AWEX's eastern market indicator increased 6c to 1478c, despite a stronger Australian dollar.

ON THE RISE: AWEX's eastern market indicator increased 6c to 1478c, despite a stronger Australian dollar.


AWEX's eastern market indicator increased 6c to 1478c, despite a stronger Australian dollar.


IN a departure from normal patterns and just to confuse the majority of pundits, wool prices rose even though the value of the Australian dollar also increased.  

Only a very small selection of 24,000 bales was available this week with no sale in Fremantle, and initially the market drifted downwards. However despite the local currency increasing in value against a softening US Dollar by a full cent the trade scrambled to fill the meagre volumes of orders they had and pushed prices higher on Thursday.

The washout for the week saw Australian dollar prices increase by 6c (AWEX eastern market indicator 1478c) and US dollar prices increase by a considerable 27c. Although this average price movement masked some reasonably significant moves within the individual categories. A lower quality offering of superfine Merino in the Sydney market saw prices there have a reality check and ease by 10 to 15c.

Melbourne saw superfine and broad Merino prices increase substantially to close 20 to 30c higher. Values for the majority of Merino categories have now lined up between northern and southern markets, and the 21-MPG is back at the top of its trading range again. Carding wools and crossbreds both meandered along to finish the week more or less unchanged in value.

The only way for growers to mitigate the risk is to sell forward, which represents good value at present.

While buyers did push the pedal harder on Thursday to cover orders and obtain some quantity and prices lifted accordingly there is little new demand flowing through from the processing pipeline at present. Not unexpected given the time of year, but some buyers are reporting very quiet conditions, while others are cautiously placing some orders for wooltop and yarn.

AWEX’s north market indicator closed down 2c on 1545c. The 17 micron indicator closed on 2183c, 18 micron 2075c, 19 micron 1837c, 20 micron 1574c, 21 micron 1505c, 28 micron 762c, and 30 micron 568c.

Volumes of business actually conducted remain small as the holiday season approaches in Europe. Asian mills conversely do not shut down over the summer period, but the early stage processors will increasingly shift their focus to processing of domestic wools and possibly reduce production levels to allow for planned maintenance programs and the like.

The South African market also finished the week on a strong note and now enters their annual two month selling recess, further limiting the amount of greasy wool available to the world’s processors. With future sales in Australia forecast to average only 30,000 bales per week for the next four weeks until the three week recess processors around the world will be running an eye over their stocks and calculating how much wool they will require to get them through until August.

As mentioned previously the first of the new season fashion fairs will be held next week in Florence. While this session of Pitti Uomo is traditionally a spring/summer suiting exhibition, some of the collections being prepared highlight the way the wool has gained more of a foothold in the warmer seasons, as well as more often being used in innovative fabrics. Using the Merino in lightweight fabrics will not only lift overall demand, but also spread the demand across seasons and hopefully remove some of the lumpy boombust nature of demand, and therefore pricing throughout the year.

In the 2017 Uomo Australian designers have been given a special recognition as the guest nation. Eight Australian designers will present their spring/summer collections at the menswear trade fair and while most in the world know that the majority of the best wool is from Australia, these designers now have the opportunity to also present some of the best designs for garments made from this fibre and can illustrate the provenance behind their garments as well.

While all seems to be travelling smoothly and predictably for the wool market, the same cannot be said for other areas of global economics at present. Not so long ago we were prattling on about how the VIX or measure of volatility had fallen to record lows and everything seemed calm and secure. Now all of a sudden we have some fractious relationships in the Middle East that could have global ramifications, a UK election that creates uncertainty, the Trump circus continuing to entertain the media and challenging behaviour from North Korea. History shows us that the wool market places a large emphasis on consumer confidence, and the only way for Australian growers to mitigate the risk is to sell forward – which does represent good value at present.

Superfine: The basis between superfine Merino and the medium Merino categories has been closing in recent weeks from the extreme levels reached in March. While many producers at the finer end had welcomed the resurgence, for the processing trade it had created difficulties and so market forces have begun to bring it back to more manageable parameters. By no means does this mean that we will return to the bad old days of all wool costing the same, but just back to a more manageable premium or basis.

Medium Merino: The basic Chinese types of T54/55 and 56 all continue to be sought after as processing mills look to keep their options open, and this will keep pressure on the low VM types needed to fill these orders at the expense of higher VM (vegetable matter) wools. In general the dwindling supply is evenly matched with measured demand at present, and in the absence of any external shocks the market should be able to maintain a reasonably steady course for the remainder of the season.

Crossbreds: After what has been a pretty ugly year by comparison, growers of crossbred wools will be understandably looking forward to better outcomes in the new season and although prices have been poor, stocks have also decreased somewhat in the processing pipeline, so a more optimistic future is entirely possible.

- Bruce McLeish is Elders’ northern wool manager.


From the front page

Sponsored by