Wool market gains 7c to close on 1943c | Elders

Wool market gains 7c to close on 1943c


Wool
AWEX's Eastern Market Indicator rose by 7c to 1943c heading into the Easter recess.

AWEX's Eastern Market Indicator rose by 7c to 1943c heading into the Easter recess.

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AWEX's Eastern Market Indicator rose by 7c to 1943c heading into the Easter recess.

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AS is often the case before a recess the market closed on a firmer note as buyers sought to keep the production flowing.

In local terms AWEX's Eastern Market Indicator rose by 7c to 1943c, and 12c in US dollar terms. Again, the better style Merino fleece gained solidly, while the poorer wools were neglected in comparison.

Crossbred wools continue to climb, especially the finer edge which are no doubt being used in blends with merino types to 'create' a cheaper and coarser version of the traditional Type 56 and Type 58.

AWEX's Northern Market Indicator closed up 1c on 1979c. The 17 micron indicator closed on 2483c, 18 micron 2404c, 19 micron 2291c, 20 micron 2264c and 30 micron 1244c.

The quality of the Australian offering has perhaps turned the corner with a higher proportion of better category types available last week in a welcome development for the processing fraternity.

Only those topmakers with access to high quality scouring machinery are comfortable filling containers with lower yielding types. Others are forced to average something reasonable in terms of scouring yield to avoid a penalty tariff, thus the enthusiasm for better yielding crossbreds to add to the mix.

There is no doubt quantity is on everyone's minds with a reasonable volume forecast of 42,000 bales available immediately after Easter, but then presumably nothing above 40,000, and perhaps less than 30,000 in some weeks, for the remainder of the season.

With South African wool still locked away the pressure on supply will be ever present for the next few weeks. - Bruce McLeish, Elders

With South African wool still locked away the pressure on supply will be ever present for the next few weeks.

There are currently around 40,000 bales lying in warehouses in South Africa, having been purchased by optimistic Chinese traders but the only sure thing they have at present is mounting interest bills. There have been no further outbreaks of foot and mouth disease in the Limpopo Province, but a porous border into Swaziland where cattle are traded freely is making the necessary certification difficult.

As soon as the government officials can satisfy their Chinese counterparts everything is secure there is a withholding period to complete before wool shipments may resume, which at present indications would see a resumption of trade in late June or July.

Increasing the reluctance of CIQ, the Chinese Quarantine Bureau to lift the ban is the presence of African Swine Fever throughout much of China. This disease in pigs, for which there is no cure or vaccination has so far led to the destruction of more than 1.01 million pigs according to a Rabobank report last week.

With the disease now confirmed in virtually every province across China, up to 200 million pigs could be culled or die from being infected as African swine fever spreads across the nation Dominique Patton writes. By far the highest such forecast yet, and underscoring the gravity of the epidemic in the world's top pork producer.

Such a large number would constitute around 50 per cent of the current herd, forcing China to import pork meat or alternatives from all over the world. The effects are already being felt in Denmark with increasing prices for pork meat, while they too battle to contain the disease, to the extent that a fence is being constructed along the German border to prevent the incursion of wild pigs who are spreading the disease across much of Europe.

Given this background, the relatively small, and now contained FMD outbreak has come at the wrong time to secure a speedy resolution, but does certainly highlight the need to maintain or even strengthen Australia's biosecurity laws.

On the economic front things are looking decidedly better with recent Chinese government stimulus already producing tangible results. The GDP figures announced last week saw a print of 6.4 per cent year-on-year for the March quarter, leading HSBC to forecast ongoing recovery which should result in a 6.6pc figure for the year, slightly above the government's target range of 6-6.5pc. As Beijing loosens the purse strings, increases infrastructure spending and provides more support of financing for small and medium-sized business, textile mills are already reporting slightly better finance availability.

In the UK it would seem that the EU has told the Poms to go away for six months and only come back when they have agreed among themselves what they actually want, but talks between the government and the opposition Labour Party have stalled.

In the US, President Donald is still harping on about the Fed doing the wrong thing when they began to tighten money supply, but not many people are actually paying much attention to his tweets. The US soya bean farmers may actually cop a more significant whack than during the tariff war if China's pig population decreases as much as forecast, significantly lowering their demand for pig feed imports.

Demand for open top wools, destined for woollen products is slightly better in China, but any greasy fleece types lower than 65pc are still difficult to sell. Topmakers who travelled to Italy for the IWTO conference hoping to meet with customers saw some lovely scenery and no doubt enjoyed good food and wine, but came away with few new orders.

Many second-tier mills in China seem to be surviving on high CVD blends, merino and crossbred wools blended together, to produce something cheap enough to sell, but generally not accepted by spinners outside of China. With many mills in Europe virtually closed for the two weeks either side of Easter, or at least running on short time the previous green shoots of demand have faltered somewhat.

While Chinese consumer activity is picking up, nobody is yet confident to predict a buoyant end to the processing season so we appear destined to limp along, caught between low levels of demand, and even lower levels of supply for the short to medium term.

- Bruce McLeish is Elders northern wool manager.

RELATED STORY: Wool market down another 7c to 1936c.

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