AUSTRALIA and South Africa both enter the winter auction recess with the wool market on a firm note, providing a glimmer of hope that when auctions resume in August things may be a little better.
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In both markets wool prices rose by 1.8 per cent across the selling week as buyers moved to fill their admittedly meagre orders and purchase enough stock to cover the three week recess.
Superfine Merino fleece saw the largest gains with rises of between 40c and 70c/kg.
A bit of a dead spot appeared in the bulk categories of 18 to 19 micron with volumes up and demand a little more uncertain, which lead to more modest gains of only 5c or so.
Medium Merino, 20-micron and coarser saw better competition and prices for this segment were 30c-50c higher.
Knitwear again continues to provide a slightly better outlook than the worsted market for fleece, so pieces, bellies and other knitting types, particularly at the finer end closed up by 20c or more.
Crossbreds sat and watched proceedings and closed unchanged for the week, whilst the carding market was all over the place depending on yield, but overall ended the week unchanged.
AWEX's Northern Market Indicator closed up 16c on 1175c. The 17 micron indicator closed on 1638c, 18 micron 1428c, 19 micron 1279c, 20 micron 1229c, 21 micron 1228c, and 28 micron 574c.
In no uncertain terms 2020 thus far has been a shocker, but in the cold light of day the current wool price is no surprise.
A drop in greasy wool price of 36pc in US dollar terms for the season almost directly correlates with a drop of clothing exports in China of 33pc, and a decrease in consumption of clothing by as much as 38pc in places like Japan.
As Chris Wilcox illustrated in the weekly newsletter from the NCWSBA, Japan retail sales declined the most in 2020, followed by the UK with 29pc, China at 26pc but Germany can hold their heads up with an increase of 1.4pc.
In very simple terms, during the first six months of 2020 people stopped shopping, because they were either concerned about their financial situation or they could not physically get to the shops to buy stuff.
It is after all a global pandemic, and so there has been nowhere to hide from the retail shock except maybe Germany.
The depth of the spread of the economic crisis, and the severity caused by locking people in their homes for a couple of months has hit the wool industry, and many others, like the proverbial freight train.
Like many other commodities, the wool textile industry was highly leveraged and very dependent on consumer confidence.
The industry had been evolving quite well to the casualisation of the work attire, and developing new product ranges in the athletic and leisure sectors.
But the global shutdown of consumer activity at a retail level with a drop of about 30pc dwarfed the 19pc drop in Australian wool exports, so the relief valve was always going to be price.
The good thing is, many of the changes or adaptions made in the previous 10 years will enable the rebound to be smoother and quicker.
Unlike the industry back in the late 1950s or the early 1990s, the Australian or global Merino wool industry is much smaller, and producing a product that the textile chain and the retail industry wants.
We no longer produce large volumes of scratchy coarse fibre, but now a well measured, certified soft, fine, strong fibre that can be worn next to skin and which is produced by a dedicated producer, able to be verified as sustainable and traced from farm gate to retail shelf if need be.
The building blocks for recovery are in place.
That is not to say that the recovery will definitively begin in August, although refilling of the pipeline will probably see a solid start to the new season. But the government stimulus being dished out across the globe will have a positive effect on consumer activity once communities get the virus under control.
Other forms of stimulus like the recent police uniform order in China which will soak up 1000 tonnes of fabric or 8000 bales of 19 to 22 micron greasy wool will help the recovery get started.
The bigger influences are likely to be environmental and wellness concerns of consumers.
While it is difficult to see a rebuild to pre-covid levels for the traditional business suit, consumers are already emerging from lockdown with a renewed focus on doing things better, caring about the natural environment, and wanting to feel good about what products they buy.
Whether this is buying a garment which won't sit in landfill for the next 50 years, or a carpet which will not burn quite so readily, wool has the building blocks in place.
COVID-19 has shown a glimpse of how the planet can look with a bit less pollution and a bit less waste, and there are people in just about every country getting back out and marvelling at their natural surroundings again.
A growing appreciation of clear skies, clean water and less busy places predisposes a consumer towards natural fibres.
The marketing campaigns of many woollen retailers in the pre-covid world already focussed on this aspect of life, so nothing new has to be developed - it is already in place.
So, in the longer term the wool industry is well positioned and prices will recover - it is just a matter of when we start to see this effect in the auction room.
There will probably be some pressure as the traditional spring flush of wool come onto the market, although there is a small chance this could be offset if mills that are currently sampling their yarns and fabrics can secure garment orders for the pending 2020-21 season.
Futures prices are indicating that current prices should at least hold for the remainder of 2020 and into the first half of 2021 as a worst-case scenario. But with encouraging signs of an uplift in consumer activity from those countries which have allowed their citizens back into shops we may be able to resurrect things, or start the journey at least, this side of Christmas.
