ALMOST like a switch being flicked, the market seemed to suddenly realise that it had been neglecting medium Merino wools far too much of late, and they were back in favour again.
All Merino types were stronger last week despite an unfavourable currency rate, despite a large offering which initially hovered around the 50,000-bale mark, and despite a fair proportion of faulty wools in all three selling centres.
The overall market indicator increased by a solid 30c in local currency, US34c and Euro21c, with all Merino types basically increasing by 50c, give or take, carding wools by 10c to 20c, and crossbreds remained grounded, but still registered a positive tone.
AWEX's Northern Market Indicator closed up 23c on 1421c. The 17 micron indicator closed on 2304c, 18 micron 1948c, 19 micron 1637c, 20 micron 1365c, 21 micron 1277c, and 28 micron 515c.
Uniform orders in China provided the trigger to refocus attention on the medium Merino segment as mills in China suddenly realised that much of this uniform fabric will be, as usual, made from 21 or 22 micron will a percentage of polyester thrown in.
Superfine Merino obviously makes a far better product, but government dollars, even in a stimulus package rarely stretch to luxurious uniform fabric for rank and file operatives.
So, the uniform trade soaks up some volume of Merino wool, as it usually does at this time of year, and mills are also refilling their warehouses in anticipation of production orders for consumer clothing in the coming season.
Nobody is yet talking about a recovery in a global sense, but glimmers of light are beginning to show with European activity just a little bit better than in previous weeks, and despite the horrors of Covid in India filling the TV news, Indian firms are still buying and providing an alternative market for exporters both here and in South Africa.
The numbers clearly show the domination of the Chinese market, at least in an early stage processing category, with the latest export data suggesting China currently accounts for 85 per cent of Australia's greasy wool.
Europe has slipped, for obvious reasons, but does still figure as an important destination for Australian wool once it has been combed or spun.
China's consumer market, be it individual or corporate, has grown considerably by comparison to the rest of the globe, so much so, that some of the best Italian fabrics this season are being exported to China.
The Chinese government has decided that it citizens have been diligent enough to deserve an extra couple of days off - or that an extra couple of days holiday will do more to stimulate the economy at present than any other lever the government has at its disposal.
So, the Labour Day holiday period has been officially extended this year to five days, rather than the usual three days.
Short trips, holidays and visits to tourist sites within the country are expected to add up to around 265 million journeys by road, rail and boat according to a transport ministry official - the likes of which have not been seen since 2019 before the coronavirus struck.
But while the day tripping helps the regional tourism operators, as everybody is aware, the main thrust of the extra holiday period seems to be getting people into retail therapy.
Consumer activity across China has lagged behind the stronger rebound in industrial production, which has seen more direct government stimulus applied.
From a wool industry perspective Chinese activity has been phenomenal, as a replacement for stagnant European and American consumer activity.
From a wool industry perspective Chinese activity has been phenomenal, as a replacement for stagnant European and American consumer activity.
- Bruce McLeish, Elders
But, some doubts clearly exist about whether the product has made it all the way through into consumer wardrobes or if there is a bottleneck at the cash register, or if there are large volumes languishing in warehouses or on shipping docks.
Given the infinitesimal market share of merino in the world's apparel, around 1.3pc, it may not be a big problem.
But if cotton and polyesters garments are building up because the Chinese consumers are being more careful with their cash than usual, a veritable mountain could be being created.
Hence the government decree, in subtle terms via an extra couple of days holiday, is to get out and spend.
Certainly, the different approach to stimulus from Beijing and Washington is stark, and probably does highlight the difference between the two economies.
American stimulus has been to firstly hand out cash to individuals, who will mostly spend it, and then follow up with infrastructure projects.
Whereas the Chinese methodology now, and also during the previous GFC recovery has been all about infrastructure spending as a means of stimulation.
The urbanisation, modernisation and increased standard of living across China is perhaps making this less effective than it was 13 years ago, hence the change in focus now to allow more leisure time, and hopefully more spending to stimulate the retail sector, which in turn stimulates the manufacturing sector, the transport sector and so on.
So, while there are no red flags at present of stock build up along the wool pipeline, and mills in early stage production at least seem to be content to refill the warehouse, a degree of caution does need to be observed.
Australia has exported significantly more wool than last year, to a world retail scene which outside of China, and perhaps including China, has been operating on life support.
If the autumn/winter selling season gets back to normal everything will be sweet, but if vaccination programs don't get moving, or if someone trips over a large pile of leftover stock from last year, or there is another, larger Suez blockage the market may just get a case of indigestion.
