Wool market closes down 14c on 1669c

The wool market continued to correct after its early November bounce and prices generally eased by 30-40c at the superfine end and 10-20c for the medium Merino types. AWEX’s eastern market indicator closed down 14c on 1669c.

AWEX’s northern market indicator closed down 20c on 1756c. The 17 micron indicator closed on 2460c, 18 micron 2277c, 19 micron 1985c, 20 micron 1758c, 21 micron 1636c, 22 micron 1553c, 28 micron 731c, and 30 micron 559c.

Crossbreds, particularly the poorly prepared lines eased another 30c to finished right back where they started three weeks ago. Cardings on the other hand bucked the trend and rose by up to 15c as local processors competed with exporters for the small qualities available.

After pushing hard for three weeks processors and exporters have either filled their orders or run out of cash reserves and so we are witnessing the inevitable pull back. Not a major correction by any means, but a necessary easing of the bullish market.

It is November after all, and processors around the world at the knitting or weaving stages appear to have their winter production plans sorted out. So a lot of them are covered for now, at least until January and they are tending to sit and watch the market rather than purchase more raw material in a market that they know has only been pushed up by early stage processors.

Another large volume awaits the trade at auction in Australia next week so most players would expect to see another similar result as we registered this week. Not the end of the world given that the majority of Merino-fleece type are still registering 100 per cent on the decile charts for the past five years.

After next week’s 52,000 bale offering we will front up to the last two sales of the year that are expected to be around 45,000 bales each. A three week recess with no auctions will test the supply chain, so it would be safe to assume an increase in activity again in January, with only the mid-February timing of the Chinese New Year holiday to disrupt proceedings.

The futures market for greasy wool on the Riemann platform yet again was a good predictor of where the auction market would head. Last week prices being offered in the short term eased by 20-30c, and the auction market duly followed. Current offers on the board would indicate that there is another 30c downside to this market, but then the curve flattens out to where is has been for a number of weeks now.

Growers selling in the spring can look at hedging 21-micron at virtually 1500c clean. In 2017 they hedged at 1400c, and back in 2016 most were very content to hedge at 1300c. So for the medium Merino growers in this case it looks like the market has been on a very steady incline of a dollar per year.

Superfine growers too have some fantastic hedging opportunities available at present for both the autumn and the spring. Trying to hedge when the market is falling, or has begun a downtrend is a mugs game, so growers would be wise to look at putting in some GTC levels now even if they are above current bid prices.

Next spring is a long way off yet, as is next autumn for that matter and plenty can happen in such a fast moving global market place that the Merino fibre is being sold into. September’s German elections have proved to be inconclusive and the Jamaican coalition has fallen apart before it began. This may herald another round of elections for Germany with an uncertain outcome or a change of direction for Germany and therefore European growth?

Then of course we have the standoff between Messer’s Trump and Kim that will probably come to nothing but who can be sure? Will the world cope with China’s newfound assertiveness? This week saw some of the world’s top fashion models denied entry to China on the basis of comments they have made on social media that were considered to be ‘unfavourable’ to China.

The retail world will be watching with bated breath for results of today’s Black Friday sales period – which although it may seem like just another excuse for a sale dreamed up by the retailers, will actually be a good barometer for the upcoming Christmas selling period.

Superfine: The ‘poorer’ selection this week did little to enthuse the European buyers and presumably next week’s selected superfine sale will bring them back. The basis for superfine is high but there is not real sign yet of it contracting, so it should be another reasonably good week for growers of good quality superfine Merino.

Medium Merino: People owning early stage-processing machinery overseas will still need to cover requirements through until early January and they haven’t stopped buying completely so there will still be an underlying level of demand. The market next week may be a little easier, but not by much.

Crossbreds: These types are back to where they started three weeks ago, but the 28-MPG is still nearly a dollar higher than 1 year ago. Less for the broader types but they are also still higher.

- Bruce McLeish is Elders’ northern wool manager.