Stellar wool market slips to 1572c

Some further adjustment in prices continued on the second selling day with a bit more downside for medium merino, but superfine Merino types with specifications good enough for the Italian processors finished strongly.

Overall AWEX’s eastern market indicator eased by 42c to 1572c for the week. Relatively stable currency numbers saw the same change in US dollar prices with a 40c fall, and around Euro33c. As one would expect in an easing market, lack of quality was punished more heavily than those lots with the best specifications.

AWEX’s northern market indicator closed down 29c on 1650c. The 17 micron indicator closed on 2274, 18 micron 2169c, 19 micron 1862, 20 micron 1663, 21 micron 1640c, 28 micron 883c, and 30 micron 658c.

Superfine Merino fleece and skirtings without the strength and style were largely ignored in comparison, and the better medium Merino fleece lines incurred less of a discount than their poorer cousins. Skirtings as a whole mirrored the overall market direction, and crossbred wools gave back a proportionate amount of last week’s increase. Carding wools, even though they had not risen in the previous two weeks, still copped a whack across the ears and closed 20c lower.

Volatility in the wool market is alive and well, but hopefully the market will now stabilise. A jump of 100c, followed the very next week by a 50c fall does nothing to inspire confidence among the buying/processing fraternity. Those customers returning from European holidays and looking to resume buying raw material for the upcoming season are wondering what to do next.

This extreme volatility will keep them sitting on the sidelines and watching for another week, if they can afford to do so. So this may in fact precipitate a further slight easing until someone steps up to the plate. However, combing mills around the world are running with relatively low inventory and so they can scarcely afford to remain out of the market for two weeks.

There is some Chinese domestic wool lying around, and some Russian and European wool heading towards combing mills that may help carry them over, but many will feel the pressure to continue buying, certainly by early September if not next week.

The rush of production orders in China for fake fur fabric has slowed somewhat as most initial orders have been satisfied. The next test will be whether retailers can move the volume of product they anticipate. If sales are positive in October/November there may well be a flurry of replacement orders again – this may tie in nicely to the increased supply that normally eventuates in November.

Italian buyers began to flex their muscles a little more this week on their preferred types in a positive sign for superfine Merino. If India and China follow suit we could well see another stellar season for that end of the market. It has been a long time since the landscape looked as promising as this for the wool market in August, and the futures market is a very good example of this confidence. Good volumes of 21-micron have traded for the spring already, and there has been the odd trade into 2018 and even 2019.

Although the scene for the wool market seems to be stable and organised wool, fashion and consumers react badly to a lack of confidence in the wider world environment. President Trump seems to be lurching from side to side and this week threatened to turn off the taps for cash unless he gets his funding for the wall. Most thought the problems of Washington running out of cash were behind us, together with the uncertainty that it brings. Hopefully the annual talk fest at the hole in the wall, Jackson, Wyoming, this weekend will bring a bit more sanity to the fore with the Federal Reserve chair Janet Yellen and also  European Central Bank  chairman Mario Draghi to deliver words of wisdom.

Superfine: Although it is still very early in the season signs are generally positive for the finer end of the industry. The response to new yarns and fabrics was very positive during the Italian fairs prior to the holidays, and the strength of the European currency, reflecting their economic improvement, is lessening the impact of rising Australian prices.

Medium Merino: As the “all eggs in one basket” dilemma dissipates with fake fur slowing down, there will still be questions about price resistance from other sectors but hopefully the newer products can overcome the certain demise of some end-user demand in the more traditional areas.

Crossbreds: Signs of life at last for the finer crossbreds, albeit on the back of blending with medium Merino to achieve a cheaper product. However, the fact that processors were buying fresh supplies of crossbred to achieve these blends indicates that the previous high levels of stock have been exhausted and so we should look forward to a better season for crossbred wools than the last six months.

- Bruce McLeish is Elders’ northern wool manager.