Wool market gains 36c as early stage processors spark up | Elders

Wool market gains 36c as early stage processors spark up

Livestock
Australia's beleaguered wool market strengthens as 36c gain as early stage processors place orders.

Australia's beleaguered wool market strengthens as 36c gain as early stage processors place orders.

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Australia's beleaguered wool market strengthens as 36c gain as early stage processors place orders.

Aa

THE mood in sale rooms across Australia was much brighter last week with early stage processors having placed enough orders to provide a bit of a spark into the previously beleaguered wool market.

There were not that many downstream orders for fabric or garment reported, so the market did not get carried away, but it was a welcome change from the previous weeks of negativity.

On Tuesday the market rose by 50c across most Merino fleece types as well as crossbreds.

On the second day of selling in Melbourne buyers were a little more circumspect and selective so prices eased back by around 15c to 20c.

In the final washup the market indicator was 32c higher in local currency terms, US12c and Euro16c to the positive.

All Merino fleece types fared pretty well, as did the skirting sector and crossbred wools also finally stopped falling.

The carding segment tended to be a little mixed, but still closed in positive territory at the end of the week.

AWEX's Northern Market Indicator closed up 36c on 955c. The 17 micron indicator closed on 1420c, 18 micron 1207c, 19 micron 1045c, 20 micron 949c, 21 micron 926c, and 28 micron 441c.

Plenty of people will be pondering if we have now passed the bottom, but the answer is no.

Retail is still sick, and has only just begun to offer their autumn/winter collection for this year, hence the lack of downstream orders in the market.

However, there is definitely a better feeling in the exporting, trading and early stage processing part of the industry, with less of the despondence and negativity than we have seen in the past three months.

Plenty of people will be pondering if we have now passed the bottom, but the answer is no. - Bruce McLeish, Elders

There are still plenty of reports outlining the horrors of the retail industry and examples of an inventory glut after such a poor spring/summer sale period.

But, while the retail sector is undoubtedly carrying a lot of leftover stock from the just finished season, the pipeline had already contracted significantly in the past six months, so that there is unlikely to be a repeat in coming months.

That contraction has been felt all too clearly right back up the chain to the greasy wool auctions in Australia and South Africa, resulting in the drop in demand and the 50 per cent price correction.

So, while retailers are having to find storage space for their leftover summer stuff, at least they have already pared back their inventory for the coming season to reflect the expected sales volumes for the coming five months.

Perhaps things will ramp up and there will be a sudden surge for top up orders - one can only hope that is the case.

So, in a glass half full approach, the apparel clothing industry may have now positioned itself to more adequately service the pandemic consumer.

The sales volumes, and therefore demand will not satisfy the production pipeline as it currently exists and there will have to be either a large adjustment in capacity or an increase in demand.

Given that the need for clothing has not fundamentally decreased, and remembering that Merino wool still only accounts for 1.3 per cent of the world's apparel market, and it may potentially increase as people emerge from the pandemic more concerned about the natural environment, their own health and with increased perceptions of value, the demand for wool will surely return at some stage down the track.

Exactly when this will take place is probably something we will only be able to ascertain with the benefit of hindsight. Whether the consumers are waiting for the US elections to be run and won, or for COVID to be beaten, or just for the world's politicians to simply stop controlling their daily movements, we don't know exactly.

But, at some point enough people will return to shopping malls and key boards for the retailers to collectively breathe a sigh of relief and start talking about new orders.

Obviously, everyone has on eye on the daily infection rate and the impending winter season for the northern hemisphere, hoping that it does not bring a further outbreak to those areas where it is slowly and steadily being brought under control.

While it is very easy to find negative statistics in the current environment, it is also fairly simple to highlight those which point to a more positive outcome which is brewing as well.

The recent data showing the number of job openings in the US increased by 617,000 from a month earlier to 6.6 million, above market expectation of 6m according to a HSBC report.

Of these openings, the largest gains were in retail trade, and hopefully quite a few involve selling apparel.

The political posturing on both sides of the Pacific continue, and although there is only an official election scheduled in one camp, both presidents are no doubt working hard to increase or maintain their domestic approval ratings.

Despite the perceived lack of progress in trade negotiations between the US and China, the phase one deal is still in place and China is hoovering up American agricultural produce in line with their commitments.

So, while the political posturing continues, and the media make a big deal out of mostly small issues, scientists are still beavering away trying to create that elusive vaccine which will undoubtedly be the trigger for things to begin to return to normal, or some version of it.

In the real world of wool growing we hope that the coming week can provide another at least firm sales result and slowly build to a positive recovery towards the end of the year.

- Bruce McLeish is Elders state wool manager - Queensland.

PREVIOUS SALES: 'Australian wool market hit by weaker US dollar'.

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