Christmas comes early to wool industry| Elders

Christmas comes early to wool industry

END OF SEASON: Christmas came early to the wool industry with the Eastern Market Indicator gaining 55c.

END OF SEASON: Christmas came early to the wool industry with the Eastern Market Indicator gaining 55c.


Christmas came early to the wool industry with the Eastern Market Indicator gaining 55c.


CHRISTMAS came early to the wool industry - at least to those growers selling this week - with AWEX's Eastern Market Indicator gaining 55c to close on 1558c.

Exporters and traders short of wool may have had a slightly different view as the volatile wool market lived up to its reputation.

AWEX's Northern Market Indicator closed up 72c on1599c. The 17 micron indicator closed on 2005c, 18 micron 1907c, 19 micron 1818c, 20 micron 1792c, 21 micron 1783c, and 28 micron 914c.

With the industry now pausing for the annual three week recess there was a bit of conjecture about how the last week of sales would pan out, especially with a large offering and lacklustre demand.

We saw a bit of positive news prior to sales starting this week in the US, and the UK and a few other greasy wool markets had been reasonably active, so the Chinese buyers suddenly decided to get off the fence and poke a few indent orders into the market.

A fair amount of wool was withdrawn prior to sale, not surprisingly given the pre-market tone - but very surprisingly 8 per cent of the wool was still passed in when prices rose by half a dollar.

Nobody on the buying and processing side can really understand the mindset of some brokers or growers who roster their wool for sale when they clearly believe it is worth so much more than the current market.

Wool is so well measured and described these days, that with the exception of cardings and some of the best superfine Merino types, there is no real surprise in the auction room that will see more than market paid for a line of wool.

When the market increases by 50c and 8pc of wool is still passed in obviously means that this wool was reserved more than 50c above the market.

If we can just get a decent rain across this parched land we would be set for a ripper 2020. - Bruce McLeish, Elders

Buyers are only human, and do get frustrated by valuing the same wool again and again, and remember those clips that are 'not for sale'. But it is a free market and growers collectively have been able to halt the slide on occasions recently by withdrawing or passing in wool when the market looked to be in freefall.

At the end of the week/year the Australian wool market had transferred ownership of just under 35,000 bales of wool. That's a far cry from the original roster of around 43,000 bales, but all segments of the market finished on a very positive note.

The market was particularly buoyant with some exporters covering existing sales, a smattering of new business and quite a bit of machinery feeding activity.

Almost without exception combing mills around the world have reduced capacity at the moment - a lack of orders coming back down the pipeline is making it difficult to sell what is normal volumes for full production, and also pushing the greasy wool market higher simply to secure enough wool to run machines is bound to end in tears in the long run, so discretion has seen most mills scale back production.

For some this means a longer than usual shutdown over Chinese New Year, whilst for others such as in South America the annual Christmas shut-down has extended from the usual two weeks to more like six or eight weeks this year.

Still, with the early stage processing industry adjusting to sparse inquiry and also to lower supply, the industry is beginning to look better with a few new orders drifting in, and retailers having a reasonable November/December period. In this current age of corporate greed and the search for never ending profit increases they are unlikely to ever say they are happy, but mostly they are doing okay.

Even without the presence of the Japanese trading companies like in the old days the greasy wool market finished very bullish prior to the three week recess.

This means that there is more likely to be business conducted over the break, compared to the situation if the market had closed on a benign note.

In days gone by, the Japanese trading houses would always step up to the plate in the final sale to ensure a strong finish and positive trading conditions immediately prior to any break in sales, often supported by some of the larger corporate buying groups.

The buying fraternity make-up is much different these days, with many small privately-owned operators and so to see a strong finish is more reflective of the natural order than some orchestrated season closes in years gone by.

There is reason for the trade to be more optimistic with the first stage of the US-Sino trade deal being agreed to. Although very scant details have been made available so far, the simple act of agreeing to something is a major milestone.

The details released around the phase-one trade deal are not going to please everyone as it does not calculate an exact amount goods which will be sent from America to China in exchange for a quantifiable reduction in IP piracy or the like.

Some of the 40 billion in agricultural goods China imports will be those which actually get shipped via Hong Kong at present, and China will strive to add another 10 billion worth of ag products on top of the 40 billion figure according to a Commonwealth Bank report.

The offset to the increase in these ag products and further opening up of the Chinese market to foreign companies in the fields of intellectual property, technology transfer, financial services, currency and foreign exchange is a reduction of existing tariffs to 7.5pc and cancelling the introduction of the new tariffs which were due to kick in last week.

So, while some nit pickers will try and measure the benefit on each side to see who has won more, the smart operators look at the big picture and see a win-win.

The world economy has pulled back from further escalation in trade wars, China has taken concrete steps towards opening up its domestic markets to allow foreign companies to benefit from its growth, and of course Mr Trump has kicked a few goals in the domestic political scene, which will offset the possible damage caused by his recent impeachment.

Across the pond Boris has kicked a winning goal of his own and finally nailed a concrete path towards Brexit.

In a similar situation the naysayers will pick holes in the Brexit agreement, but at least the UK and Europe can now move forward with their lives.

The mood of consumers has now been given a significant boost that should allow the wool industry, among others to get moving again.

There is still a way to go, but two of the largest impediments to confidence have been removed.

If we can just get a decent rain across this parched land we would be set for a ripper 2020.

- Bruce McLeish is Elders northern wool manager.

LAST WEEK: 'Merino fleece gains 20-40c'.


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