19.5 micron fleece making $23 | Elders

Australian wool market: 19.5 micron fleece making $23


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WOOL MARKETS: With 19.5 micron fleece selling for $23 and 21 micron not far behind Australian wool prices are still fantastic.

WOOL MARKETS: With 19.5 micron fleece selling for $23 and 21 micron not far behind Australian wool prices are still fantastic.

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With 19.5 micron fleece selling for $23 and 21 micron not far behind Australian wool prices are still fantastic.

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WHILE is seems like another boring, similar week in the wool industry, that would be a very complacent overview.

With 19.5 micron fleece selling for $23 and 21 micron not far behind prices are still fantastic. A weaker US dollar, and therefore stronger Australian currency saw AWEX's Eastern Market Indicator eased by 16c to 1963c in local terms, while gaining US5c for the week.

AWEX's Northern Market Indicator closed down 20c on 2007c. The 17 micron indicator closed on 2538c, 18 micron 2457c, 19 micron 2331c, 20 micron 2298c, 21 micron 2283c, and 28 micron 1165c.

Again, the better style Merino fleece was strongly sought after but the few mills capable of processing the lower yielding, poorer style, drought affected wools were able to pick and choose from a large selection.

Cash strapped exporters and processors were forced to limit their activities on the second-tier wools, and so skirtings and carding wools eased a bit but crossbred wools continue to find favour purely as a defensive option against the high cost, uncertain market of the Merino types.

Much debate and contemplation are going on within the trade at present about the future direction of the market. Everybody along the pipeline from growers, exporters, early stage processors and garment wholesalers and retailers are trying to ascertain the pattern and future direction.

On one hand a market, such as we have at the moment that is being supported to a large degree by tight supply will eventually succumb to demand. However, even though many are saying that demand is lacklustre, and does not justify the current pricing structure, the fact remains that stock is not being build up along the pipeline, therefore demand must be sufficient to pull through what is entering the process from the raw material end. Then there are the aspects of wool, in particular Merino, that tick all the boxes with today's consumer.

Ethical production criteria, sustainability and environmental stewardship all contribute to create a product that consumers want to own. New and exciting garments with naturally occurring characteristics that keep the wearer cool or warm, dry and comfortable but do not contaminate the planet's oceans and waterways, nor sit in landfill for a hundred years, are obviously easier to sell than a piece of plastic.

While some are murmuring that the cost of Merino is too high, plenty of others are simply getting on with the job of producing garments and selling them. - Bruce McLeish, Elders

While some are murmuring that the cost of Merino is too high, plenty of others are simply getting on with the job of producing garments and selling them. Everyone in the trade is looking carefully at the supply availability in coming months and expecting numbers will tighten even further next month.

There is a rolling supply of passed-in wools that are keeping the weekly auctions above the magical 40,000 bale figure, but given that South Africa is still quarantined, the machinery in China alone has an appetite of at least this volume if not more. When other sources of supply become available in the northern spring and summer it will reduce the emphasis on the Australian market and it is likely that a pullback to some degree will be forthcoming.

Having said that, these wools from the northern hemisphere (China and Russia as well as European sources) do not, in most cases have the same quality attributes of the Australian Merino. They do however provide fodder for machinery at a lower cost and can be used in a wide variety of knitwear products where dark and medullated fibre is less of a concern.

The high-end knitwear producers still require performance than only Australian Merino can provide, and there is not a lot of Russian or European wool that would feel very comfortable next to skin.

Therefore, demand will reassert itself on the market in coming months as the supply constraint, after a bit more of a squeeze into April is alleviated. But, what sector dominates the demand category will be the interesting factor.

If high quality Merino garments continue to dominate at a retail level we may actually see the better quality, fine and superfine Merino prices continue to rise. If, however more focus is turned towards lower cost, generic wool sweaters and the like, the lower cost wools will become the norm and prices will drift downwards. All the more reason that the industry needs to not take the foot off the pedal from a marketing perspective and keep Australian merino front and centre in the eyes of the consumer.

So, what will the consumers be wanting, and prepared to purchase in coming months? No doubt many great minds are contemplating that very question on a daily basis as the marketing gurus try to unlock that secret. Governments around the world are desperately trying to keep their economies on an even keel to encourage consumers to spend, as without consumption much of the world's mechanics as we know it will stop.

Last week saw the US Federal Reserve finally agree to put away the interest rate hike button, and instead draw a flat line for the remainder of 2019 on their dot point chart. Postponing their quest to get interest rates back into a more normal range, where they can actually be used as a financial level again. They did manage to ratchet down the stimulus program somewhat and will only buy Euro15 billion of bonds a month from May.

Theresa May is exuding confidence that there will be something left in Britain by June to actually exit with, if she can actually win a vote in parliament. However, it is probably having a consolidating effect on the rest of Europe which is a good thing for the wool industry given that it remains such a significant market for the product. And of course, there is the drawn-out saga of China's trade talks with America.

Very little news of late hopefully signifies progress rather than division and basically 1.3 billion Chinese consumers will react accordingly when a final proposal is put forth. The importance of these talks and their effect, rather indirectly, but via the consumer on the wool industry has become huge.

- Bruce McLeish is Elders northern wool manager.

RELATED STORY: ‘Australian wool market eases another 29c’.

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